"A snapshot of the present-day health of any nation can be ascertained by reviewing two factors: annual government budget deficits as a per cent of Gross Domestic Product and the unemployment rate. The accelerated level of deficit spending, except in times of a major war (such as World War II), is indicative of a lack of fiscal discipline and tax revenues sufficient to finance those expenditures. These revenues can only come about from a growing economy and near full employment. When high deficits are coupled with a dramatic increase in unemployment for more than two or three years in a row, that country has embarked on a dangerous road that will lead to insolvency if not addressed quickly.
Total national debt as a percent of GDP, while important and meaningful, becomes critical only when a country cannot meet its current debt obligations as a result of declining revenues, which are a byproduct of high unemployment as well as continued over-spending. Some governments, for ideological reasons, and some who do not wish to confront reality choose to begin running extremely large annual deficits, which accelerates the growth of the national debt and also results in dramatically slower growth of the GDP. This is the start of a never-ending death spiral unless spending is dramatically curtailed and the GDP grows, creating more jobs and thus tax revenues.
If a nation wishes to maintain its solvency and continue to expand its economy, it should not experience deficits higher than 3% of its GDP and, in today's quasi-welfare societies, unemployment rate above 6 to 7%. On an aggregate basis a combination of these factors should always remain below 10. The higher the index above 10, the greater the problems that country is experiencing and viable solutions to solve these dilemmas will be increasingly difficult to enact".................LINK
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