Good morning.
Do deficits matter?
I have spent much of my career in the vicinity of that question, having covered U.S. fiscal policy as a cub reporter in the 1980s. That’s when supply-side Republicans dropped their concerns about deficits to push tax cuts as a counter to Democrats who had already abandoned deficit concerns to push spending increases. A stalwart but steadily shrinking group of people continued to beat the deficit drum, arguing deficit spending would “crowd out” private investment. But the new millennium obliterated that argument, too, by making capital plentiful and free. “Crowding out” went the way of the Walkman.
Well, suddenly, they’re back. Deficits, that is. I’m not sure the last time a deficit story led the New York Times, but yesterday morning, it did. The story quoted new Congressional Budget Office projections showing a combination of pandemic-era spending, aging boomers and rising interest rates would add $19 trillion to the U.S. national debt over the next decade—$3 trillion more than previously forecast. Total debt outstanding will equal the total economic output of the U.S. economy next year and reach 118% of GDP in 2033.
