The United States is facing a significant challenge with its budget deficit, which has reached $2 trillion more than the revenue it has raised in taxes in the past year. This deficit is not caused by a recession or stimulus spending but rather reflects America’s long period of low unemployment in fifty years. Despite this, the deficit has been above 3% of GDP since 2015 and is expected to surpass 100% of GDP next year.
The rising deficit can be attributed to several factors, including wars, the global financial crisis, and COVID-19. Additionally, unfunded tax cuts and stimulus programs have only made things worse. While both Republicans and Democrats claim to prioritize fiscal responsibility, their actions often contradict their words. The next president will have to make a crucial decision regarding the renewal of Donald Trump’s tax cuts from 2017, which could further worsen America’s fiscal outlook.
In the past, near-zero interest rates made managing large debts more manageable for the government. However, with rates now higher, the government is spending more on servicing the debt than on national defense. This shift in interest rates has added urgency to addressing America’s growing deficit. Failure to act decisively could lead to a deterioration of America’s fiscal trajectory and pose an economic challenge for future generations.
Overall, America needs to take action to address its budget deficit before it becomes too difficult to manage. This will require both political will and cooperation between different parties and branches of government.