Judging by the financial market's renewed unease about Italy and Spain over the past week it would seem that all that the European Central Bank's €1 trillion liquidity injection in the European banking system bought was around four months of relative market calm.

Attempts at austerity and deleveraging in Europe have converted an economic problem into a political dilemma, with leftist governments rising against Germany's austerity-laced rescue packages. Germany now faces a tough economic decision that will involve choosing between a breakup of the current euro system and a movement toward a common fiscal policy in Europe.

The world is becoming increasingly scary at the very time that the military will be facing 20% reductions. With each passing day, the world closes in; with each passing day, our ability to manage that world degrades.

This is House budget week, and with it comes the strong possibility that Republican leaders will bow to the demands of their die-hards and try to alter the deal reached in the Budget Control Act last year that ended the impasse on the debt limit and set caps on discretionary domestic and defense spending.

In his latest AEI Economic Outlook, The Limits of Monetary and Fiscal Policy, AEI scholar and economist John Makin warns against further fiscal and monetary stimulus as pressure increases on the Fed to initiate another round of quantitative easing.

The financial turmoil convulsing the Eurozone and threatening global economic recovery are a result of rising public sector debt, and these problems will likely be magnified in the coming future, especially when factoring in demographic trends.

Alan D. Viard, a resident scholar at AEI, reviews the budget outlook, the need for tax reform and the benefits of moving to a progressive consumption tax. He also discusses his forthcoming book, Progressive Consumption Taxation: The X Tax Revisited, which he coauthored with Robert Carroll of Ernst & Young. The book will be published by AEI Press in the Spring.

The debt limit, as currently defined, is meaningless. The limit does not need to be raised; it needs to be reformed.