If, for example, the U.S. economy grows at an inflation-adjusted annual rate of 1.7% — about the rate it’s currently growing — government debt will reach 122% of annual economic output as of 2015, up from 93% now. Annual growth of 2.7% would cut that estimate to 110%. The difference equates to about $2.2 trillion, or close to $7,000 a person.
….In any case, the U.S. and other countries will have to get the trajectory of their debts under control, either by cutting spending or raising taxes. In a separate report, IMF economists offer some evidence that cuts are preferable. Looking at the experience of 15 advanced nations over nearly three decades, they find that a spending cut equal to 1% of GDP has, on average, had a negligible effect on economic output over the next two years. A tax hike of the same size has shaved a cumulative 1.3% off output over the same period.
Even if cuts, which cuts?
See, Number of the Week: Slow Growth Adds to Deficit – Real Time Economics – WSJ.