Sen. Gregg: U.S. Headed for ‘Financial Meltdown’

The United States has set itself on a course for economic disaster, thanks to the exploding budget deficit and debt burden, says Sen. Judd Gregg, R-N.H.

Much of the problem stems from the $787 billion fiscal stimulus plan enacted last year, he says.

“It’s been a disaster from the standpoint of our fiscal policy. We added a little over $1 trillion of debt for virtually no change in the economic ground,” he told the Financial Times.

As for the budget deficit, it totaled $1.4 trillion last year and will likely register about the same amount this year.

The growing debt has largely been funded by China, but that country has begun to reduce its purchases of Treasury securities.

“We have had China say that they are looking for other places to put their reserves, and that is probably a smart decision on their part,” Gregg said.

“So the warning signs are pretty clear and the path is unsustainable, and, at this point unless we take different actions, unavoidable.”

So what’s the upshot? “We haven’t faced up to the crisis which is impending, which is the financial meltdown of our nation due to excessive debt,” Gregg said.

He sees that happening in five to seven years.

Most experts say the bigger problems are overseas.

The debt explosion will likely push several nations into default during the next few years, but it won’t be as bad in the U.S., says Harvard economist Kenneth Rogoff.