Federal Fiscal Policy Is Hollowing Out Our Economy

The Congressional Budget Office (CBO) is out with a new study: The 2022 Long-Term Budget Outlook.

To me, it is an economic forecast that borders on bleak.

With (for the most part) good intentions, policymakers attempted to spend our ways out of the Great Recession of 2008 and the COVID pandemic.

But they didn’t just balloon deficit spending in order to accomplish that: they advanced it to the point of creating the fiscal equivalent of the Big Bang.

Says the Congressional Budget Office: “Such high and rising debt could have significant economic and financial consequences. It could, among other things, slow economic growth, drive up interest payments to foreign holders of U.S. debt, elevate the risk of a fiscal crisis, increase the likelihood of less abrupt adverse effects, make the U.S. fiscal position more vulnerable to an increase in interest rates, and cause lawmakers to feel more constrained in their policy choices.”

I agree with the CBO. The alchemy of deficit spending and vanishingly low (at least until recently) interest rates will, in the end, have deleterious economic effects upon all of us.

Source: https://www.cbo.gov/system/files/2022-07/57971-LTBO.pdf