ARE - The Fiscal Death Spiral Has No End In Sight
2024-02-11 08:35:00 ET
Summary
- The US is on an unsustainable fiscal path, accumulating debt at a faster pace than the economy is growing.
- The US fiscal situation is worsening at an exponential pace, with no solution in sight.
- While many believe that soaring government debt will lead to inflation or rising interest rates, the more likely outcome is a continuation of low growth and low inflation, similar to Japan's experience.
In the long run, the U.S. is on an unsustainable fiscal path.
Those words weren't spoken by Paul Ryan or some other Tea Party-era Republican. Nor did they come from some fiscally conservative think tank.
Rather, it was said by Federal Reserve Chairman Jerome Powell in a recent 60 Minutes interview .
The United States government is accumulating debt at a faster pace than the economy is growing. That, asserts Powell, is unsustainable. Spending more than you make, or consuming more than you produce, is always unsustainable, whether you're talking about individuals, businesses, or governments.
Of course, the US federal government's finances don't work the same as a household's. Households don't have access to money printers, nor can they claim to control the primary global reserve currency.
Even with money printers and global reserve currencies, though, we intuitively know that there is something wrong with a nation spending more than it makes....
The Fiscal Death Spiral Has No End In Sight