The US Government debt will rise to $11.3 trillion with the proposed $700 billion bailout of troubled mortgages now before Congress. That amounts to $37,098 of public debt per citizen. To say the US financial system is stressed is to understate the issue. The question is whether foreigners will come to demand higher interest rates on US IOU's. Tax increases are ruled out by the political stances of each of the current Presidential candidates - Obama simply wants to shift the tax burden from poor to rich. They are also ruled out in the US by fears such increases will intensify the likely forthcoming US recession.
The British don't seem to have the same conccerns. A tax increase of 5 pence in the pound is anticipated to cover their financial-crisis-induced budgetary problems.
US policy options are narrowing as the US economy faces the prospects of decades of removing a massive public debt burden. With a current account deficit of around $800 billion - accumulating at the rate of around $13 per US citizen per day - around 7% of GDP in aggregate - there seem to be no easy policy options. Eventually taxes in the US must be increased and public spending cut so that the US economy pays its way internationally. It is difficult to think of these things in the midst of a financial crisis but the US response to this crisis further constrains its longer-term policy options.