Economists Warn We Can’t Keep Ignoring The National Debt Forever

With COVID-19 ravaging the country and government pandemic lockdowns devastating our economy, the national debt has understandably slipped to the back of many Americans’ minds. But the federal government continues to fall deeper into the red at a dramatically accelerating rate. Free-market economists interviewed by FEE warned that we can’t continue like this forever without grave consequences.

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Even before the potential passage of President Biden’s $1.9 trillion stimulus proposal, the national debt officially exceeded the size of the economy in 2020. This means we will soon owe more than we produce in an entire calendar year. And it’s only going to get worse. The nonpartisan Congressional Budget Official now estimates that we will hit a 200 percent debt-to-economy ratio in 30 years, a truly unthinkable and unprecedented level of debt.

And that’s under “a rosy scenario that assumes no new spending programs, no wars, no recessions, all temporary tax cuts expire, and interest rates remain low,” Manhattan Institute economist Brian Riedl tells me. 

“By that point in 30 years, CBO projects an annual budget deficit of 12.6% of GDP (the equivalent of $2.5 trillion today),” Riedl says. “Half of all taxes will go towards interest on the debt. Again, that is the rosy scenario.” 

Of course, the government drowning in debt likely isn’t going to affect the average American tomorrow. But while interest rates are at near-zero levels, they can’t continue like that forever, Riedl warns. 

“Too many people believe interest rates can never rise again, or do not realize that nearly the entire national debt would reset into the higher interest rates,” he said. “Basically, we are gambling America’s economic future on the hope that interest rates stay below 3% or 4% forever.”

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Brad Polumbo (@Brad_Polumbo) is a libertarian-conservative journalist and Opinion Editor at the Foundation for Economic ...

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