Treasury Secretary Geithner says the US fiscal position is unsustainable unless deficits are trimmed in the future.
I would normally agree with him but his budget proposals show the deficit only falling to $800 bln a year in the out years- (5-10 years down the road). Trillion dollar deficits (nearly $2 trln this year) over the next four years are backed in the cake, assuming a reasonably strong recover. If the economy has an anemic recovery, the deficits will widen further.
Markets are clearly nervous that the deficits will prove unsustainable as there is no political will to cut spending. That will force tax hikes which will keep any recovery sub-par. Not a rosy outlook.
Adding to the jitters is news that Treasury just announced the sale of $101 bln in Treasury coupons next week. That is a lot of supply for the market to absorb.
