In the first six months of fiscal 2021, the U.S. government ran a record budget deficit of $ 1.7 trillion.
Federal Reserve Chairman Jerome Powell has said this is sustainable – for now.
In a webinar sponsored by the Economic Club of Washington DC, Powell said the economy can handle the current debt. But he warned that the long-term trajectory of the US budget is unsustainable.
“The US federal budget is on an unsustainable track, which just means the debt is growing significantly faster than the economy. And it is by definition unsustainable over time. It is different from saying that the current level of debt is unsustainable. It’s not. The current level of debt is very sustainable. And there is no doubt that we are able to service and issue this debt for the foreseeable future. “
Powell said the US government will eventually have to “get back on a sustainable path.”
“It’s something best done in the very good times, when the economy is at full employment and when taxes are coming in. Now is not the time to prioritize rather than worry. But it is nonetheless an important concern that we will eventually have to return to when the economy is strong. “
Newsflash – this will never happen.
The US government was on this borrowing and spending pathway before the coronavirus pandemic, and it will stay on this path forever – until this path ends.
It is easy to brush aside the current government spending frenzy because we are in the midst of an “emergency”. This is exactly what Powell did. Virtually everyone agrees that the stimulus is needed to cope with the economic impacts of the coronavirus. But the Trump administration was stimulating long before this emergency.
During his campaign, Trump vowed to deal with the skyrocketing national debt. In fact, he said he could deal with it “fairly quickly”. This, of course, never happened. And you can’t blame the pandemic. The Trump administration ran huge deficits in the years leading up to the coronavirus outbreak. The budget deficit for calendar year 2019 was over $ 1 trillion. And as you will recall, the mantra was that the economy was booming. President Trump kept calling it “the greatest economy in American history.” Wouldn’t it have been time to tackle the problem of the budget?
This is Powell’s assertion. And don’t forget he was the head of the Fed during that time. I have apparently missed his calls to fix the unsustainable fiscal problem during these good economic times.
And of course, the Trump administration has not addressed the issue of the budget.
If Republicans weren’t willing to settle the debt, does anyone really think Biden and his Democratic cohorts will? Of course not. After pushing another massive stimulus, the current president is already eyeing an “infrastructure” borrowing and spending bill.
You can be sure of one thing: politicians will always find a reason to borrow and spend money.
There is always an excuse to borrow and spend more. Now it is an emergency. And when times are good, politicians will tell us it is time to “invest in our future”. There is never a time to “prioritize concerns” about budget deficits and paying down the national debt. It’s still “kicking the road,” as Powell now recommends. It works fine – until you run out of road.
In a letter to James Madison, Thomas Jefferson asserted that we have no right to bind future generations to pay our debts.
“No man can, by natural right, oblige the lands which he occupied, or the persons who succeed him in this occupation, to the payment of the debts contracted by him. Because if he could, he could, during his own life, devour the usufruct of the land for several generations to come, and then the land would belong to the dead, and not to the living, which would be the reverse of our principle. . “
Politicians have short-term horizons. This is why they usually make bad decisions when it comes to spending money. They don’t care about the future beyond the next election cycle. They sure don’t care about my kids. Elected officials are doing the popular thing now to secure re-election tomorrow, regardless of the long-term consequences. They hide the economic house of cards of the faltering house behind shiny new decks and “must-have” government programs.
Powell is right when he says the federal budget is on an unsustainable track. He is wrong to suggest that nothing will ever be done about it. The powers that be will remain on this unsustainable path until the end. And it will be a bitter end.
Disturbing footage shows a woman with infamous cartel tattoos moving a baby through an airport.
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