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John Mauldin: The U.S. Must Cut $10 Trillion in 10 Years, or Taxes Will Skyrocket

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This week's debt ceiling deal seems not to have satisfied anyone on either side of the political spectrum. For the Tea Party and fiscal conservatives, the deal to cut $2.4 trillion in spending over the next 10 years does not go far enough. For liberals, the deal calls for too many spending cuts, especially to Medicare, without raising revenues, that is to say taxes.

John Mauldin, president of Millennium Wave Advisors and author of Endgame: The End of the Debt Supercycle and How It Changes Everything, says we need a combination for both. He's calling for greater debt reduction through spending cuts and tax hikes, not an easy position for the Republicans to take. "We've got to cut spending, and I'm afraid we're going to end up having to find ways to raise revenues," he tells Henry Blodget. "You can call it tax increases, you can call it reducing the tax expenditures."

For the U.S. to make any progress on the deficit, Mauldin says Congress must cut $10 trillion over the next decade. Make no mistake, cutting that much will cause pain, but the alternative to continue to kick the can down the road will only create more pain. "We don't want to become Greece," he warns. If we fail to address the problems now, we'll have to "raise taxes to levels nobody can comprehend," he argues.

What about those who say we should just default?

That's not an option," he says. "We're the world's reserve currency. We can't do that. It would cause global crisis, global recession, trade wars and an economic catastrophe on par with the 1930s."