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• While financial markets have focused on sovereign debt sustainability in Europe, the US has not yet suffered a debt-sustainability contagion due its monetary autonomy and safe-heaven status.
• The US has been running persistent budget deficits since 1970, mainly attributed to increasing government spending and a trend towards lower taxation since the late 1990s.• The continuing disproportion between revenues and spending, combined with the aging of the population and the rising health care cost, could result in a greater accumulation of government debt and create doubts about longer-term debt sustainability of the US economy.
• Implementing effective consolidation and reform plans in a fragile US economic recovery will probably prove a real challenge for the US authorities.