{"id":62618,"date":"2018-04-10T04:59:20","date_gmt":"2018-04-10T04:59:20","guid":{"rendered":"https:\/\/www.biphoo.com\/bipnews\/?p=62618"},"modified":"2018-04-10T05:35:42","modified_gmt":"2018-04-10T05:35:42","slug":"why-americas-return-to-1-trillion-deficits-is-a-big-problem-for-you","status":"publish","type":"post","link":"https:\/\/www.biphoo.com\/bipnews\/news\/why-americas-return-to-1-trillion-deficits-is-a-big-problem-for-you.html","title":{"rendered":"Why America’s return to $1 trillion deficits is a big problem for you"},"content":{"rendered":"

Why America\u2019s return to $1 trillion deficits is a big problem for you<\/span><\/strong><\/h2>\n

The federal government is on track to have a $1 trillion deficit in 2020 \u2014 and to continue running yawning deficits for years to come, the nonpartisan Congressional Budget Office predicted Monday.<\/span><\/p>\n

It\u2019s a report that should make Americans concerned, especially younger ones.<\/span><\/p>\n

On a basic level, this means the U.S. government is spending way more money than it brings in. This is not a new problem. The United States has been running a deficit every year since 2002, but the situation is about to get really ugly. The country has never run this high of a deficit during good economic times. If spending keeps up at this pace (and there is every indication that it will), President Trump and his successors are going to have less flexibility to pump up the economy during a downturn or even a crisis.<\/span><\/p>\n

\u201cThis is unprecedented,\u201d said Justin Bogie, senior policy analyst on fiscal affairs at the conservative Heritage Foundation.<\/span><\/p>\n

It doesn\u2019t mean the economy or stock market will crash tomorrow. The United States is able to run such high deficits because the U.S. Treasury turns around and sells U.S. debt to investors around the world. Right now, a lot of people want to buy U.S. government bonds, even though America already has $15 trillion in debt owned by the public. But the problem is no one knows when people might say enough is enough and stop buying U.S. debt \u2014 or demand much higher rates of return.<\/span><\/p>\n

Even if the nightmare scenario doesn\u2019t materialize, deficits are a drag on the economy. Investors opt to buy government debt instead of making the type of private investments that create jobs or raise wages, economists warn.<\/span><\/p>\n

Didn\u2019t Obama run a $1 trillion deficit? Some may recall that the U.S. government ran trillion-dollar deficits each year from 2009 to 2012, but that was during a terrible economic period when America (and much of the world) was trying to climb back from the global financial crisis and ensuing recession. The government spent heavily to try to revive the economy.<\/span><\/p>\n

Now growth is healthy, unemployment is extremely low (4.1 percent) and confidence is strong. In times like these, the U.S. government has almost always narrowed the budget deficit \u2014 or even runs a surplus, as it did from 1998 to 2001, the end of the dot-com boom. But instead of improving the government\u2019s budget situation, Congress is going the opposite direction and adding to it.<\/span><\/p>\n

\u201cWe are running up the national credit card when everything is going our way economically,\u201d said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. \u201cIt shows Congress has lost any will to make hard choices to fix near-record debt levels we\u2019re already facing.\u201d<\/span><\/p>\n

What it means for you. To underscore how large the debt is getting, the CBO notes that by 2028, the debt held by the public will be at the highest level (as a percent of the U.S. economy) since World War II.<\/span><\/p>\n

A day of reckoning is likely to come at some point where the United States will have to raise taxes or cut benefits and programs that many people have come to rely on \u2014 or some combination of both.<\/span><\/p>\n

Many Americans under 50 are likely to face some pain from this, and the under-35 population will likely be especially hard-pressed to pay more to the government while getting back far less than their parents and grandparents did. Spending on everything from Social Security to roads, research and schools could potentially decline.<\/span><\/p>\n

How worried should I be? The U.S. government hasn\u2019t tested that level of debt \u2014 where debt held by the public equals the entire size of the U.S. economy \u2014 in the modern era. That\u2019s why so many economists, from the left and right, have been warning Congress and the White House to act now before it gets that bad.<\/span><\/p>\n

\u201cThe bigger the debt, the bigger the chances of a fiscal crisis,\u201d CBO Director Keith Hall said Monday. \u201cWhen do you start to fix a thing like this? The longer you wait, the more draconian the measures have to be to fix the problem. That\u2019s the biggest warning.\u201d<\/span><\/p>\n

One of the places the U.S. government typically looks at first to cut back on is so-called \u201cdiscretionary spending,\u201d which means spending on education, housing for the poor, veterans benefits, scientific research, roads and bridges and other infrastructure, etc. The problem is that the CBO forecasts that, a decade from now, America\u2019s interest payments alone will exceed discretionary spending on all nonmilitary items combined. That means it\u2019s going to be harder and harder to find money in the budget to cut because the government can\u2019t stop paying interest (unless it wants to default, which would likely trigger even worse economic consequences).<\/span><\/p>\n

Source:-https:\/\/www.washingtonpost.com\/news\/wonk\/wp\/2018\/04\/09\/why-americas-return-to-1-trillion-deficits-is-a-big-problem-for-you\/?utm_term=.a6ed84e77e59<\/span><\/p>\n

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