Category Archives: budget

Seeking Sustainability in US Debt

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June 19, 2023 — After an interval when little attention was paid to the long-run prognosis for government debt, its sustainability is again front-and-center in the United States, as in many other countries.  The reason is not the concocted debt ceiling crisis, which was resolved at the end of May, two days before a looming default. A likely reason is, rather, the big increase in interest rates over the last year.

So long as interest rates, both nominal and real, were historically low — even close to zero in 2021 — it seemed fine for the government to borrow.  In particular, short-term real interest rates, that is, nominal interest rates minus expected inflation, were negative.  But now that interest payments on the national debt have risen, with more to come, the situation doesn’t look so benign. read more

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Crashing Through the Debt Ceiling

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January 31, 2023 — The US federal debt hit its legal limit, $31.4 trillion, on Thursday, January 19, 2023.  Everyone feels that they have seen this movie before: there is no need for alarm because the politicians will strike a deal at the last moment.  But this time, the movie could well end tragically, as a result of the intransigence of Republicans in Congress.  It is likely that they will refuse to raise the debt ceiling until after they have driven the car over the cliff.  This could mean a once unthinkable default by the US government.  Unfortunately, letting them do that may be the best strategy available to President Joe Biden when the time comes. read more

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Republicans fight deficits only when a Democrat is President

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January 28, 2021  —  High among the many priorities of newly-inaugurated US President Joe Biden are the challenges of an economy that appeared to be slowing down as the new year started, with the latest employment numbers looking bleak.  A fourth-quarter slowdown in the US recovery from the horrendous second quarter could be attributed to the expiration of some of the bipartisan stimulus programs that were passed by Congress in March of 2020, or to the third wave of Covid-19, or to both factors.  Even if Covid-19 abates during the course of 2021 and pent-up consumer demand then kicks in, the US faces challenges right now, in such areas as schools, infrastructure investment, state and local finances, and especially the fight against the pandemic itself. read more

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