With Deficit Payments Bigger Than the GDP of Denmark, U.S. Faces Tough Budget Choices
Article from For Liberty by Norm Leahy.
An evolving school of economics called Modern Monetary Theory contends government deficits don’t matter. All that red ink, the thinking goes, is irrelevant to a nation like the United States, which has a worldwide reserve currency and has the ability to print as much money as needed to meet social goals.
Plus, with interest rates at historic lows, paying off that debt isn’t really a burden to current or future taxpayers.
The National Taxpayers Union Foundation says that’s just not true. Interest payments are steadily gobbling up federal revenues, and are already bigger than the entire domestic product of some countries:
According to CBO, the federal government had over $22 trillion in debt and spent $376 billion in paying off interest in FY 2019. As a comparison, $376 billion is more than the entire GDP of Denmark in 2019.
Over the long term, debt reduces economic growth, jobs, and incomes (and by extension, government tax revenues):
…even without taking into account the economic effects of the pandemic or the stimulus spending, the large and growing debt-to-GDP ratio in the U.S. would result in a loss of $4 trillion or $5 trillion in real GDP by 2049. Including the consequences of the pandemic into the equation means an additional 20 percentage points to the current debt-to-GDP ratio, which would harm the economy even more.
How to avoid this trap? Reducing government spending…and accepting the fact that Uncle Sam can’t afford to do everything for everyone.