The U.S. government’s debt will be almost twice the size of the U.S. economy by 2050, according to new projections from the Congressional Budget Office. That would be up from 98% this year and 79% in 2019. (The prior, pre-coronavirus forecast for 2050 debt in January was “just” 180%.)
Low interest rates “indicate that the debt is manageable for now and that fiscal policy could be used to address national priorities,” CBO director Philip Swagel said in a statement. But, worriers that they sometimes are, the CBO declared that the budget path is unsustainable over the coming decades. And borrowing costs will eventually rise and become an issue. (The CBO did not address either the ability of other countries to finance U.S. deficit spending (China, Japan, and Europe are all aging relatively quickly) or their willingness to continue to support the U.S. standard of living.)
Of course, the really smart economists know that none of this matters since Modern Monetary Theory argues that countries like the United States, which borrow in their own currency, don’t need to worry about boosting debt to support growth. In theory as long as inflation remains under control.
I have to admit that I’m suspicious of Modern Monetary. It’s only a coincidence, I’m sure, that the theory has gained momentum just as U.S. government debt spirals out of control, leaving us here in the United States with the option of really, really pulling in our belts or developing a story that it really isn’t a problem that the debt is on a path to hit two times GDP.
