During the Obama administration, many economists and political commentators became worried that the U.S. faced endless budget deficits that could cause higher interest rates, depress investment, and slow economic growth. Some elected officials pressed for a so-called grand bargain in 2011 between the parties that would both reduce spending and increase revenue, and a bipartisan commission was appointed to address the issue.
Although the commission failed to reach an agreement, the negative consequences that budget hawks predicted didn’t come to pass. Instead of rising, inflation rates slowed after 2011 and remained low for years. The economy entered a period of growth until the pandemic disrupted everything.
It seemed that our concerns had been discredited. Perhaps the U.S. could continue down this road indefinitely. We could cut taxes, as President Trump did, and increase spending, as both he and President Biden did, without paying a price. As former Vice President Dick Cheney reportedly told former Treasury Secretary Paul O’Neill in 2002, “Reagan proved deficits don’t matter.”
Or do they?
A study by the Committee for a Responsible Federal Budget found that during his term, Mr. Trump approved policies requiring $8.4 trillion of new 10-year borrowing, while Mr. Biden has so far approved a $4.3 trillion increase. The Congressional Budget Office this month laid out the consequences in an economic-outlook report. The U.S. over the next decade will rack up a budget deficit totaling more than $22 trillion, raising the federal debt from 99% of gross domestic product in 2024 to 122% in 2034. Annual interest will nearly double, from $892 billion this year to more than $1.7 trillion a decade from now—more than projected spending on defense.
// Moderator notes ~ Invalid link – need link to article//
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