Rather than reading this opinion piece, you can learn more about the “debt crisis” by just studying this chart which shows what percentage of the federal budget goes toward paying off the debt:
The situation is similar to what it was in the late 1980s, and it can mostly likely be managed with the same level of spending restraints we saw in response to that.
Share of budget is actually a terrible way to look at this because the budget itself has exploded, and that ratio hides most of the real modern risk.
Interest costs in the 80s spiked because high rates were applied to a much smaller debt base. Today we have the opposite problem: rates that are high compared to the 2010s are now rolling onto a massively larger stock of debt. We’ve only just started to refinance that debt at the new levels, so the full impact hasn’t even shown up yet. We are still seeing significant inflation (meaning rates still have upwards room to grow), beginning signs of an economic pullback, are beginning to see signs of a Fed unwilling to raise rates sufficiently due to the impact on the fiscal environ, etc.
If you compare government budget as share of GDP, you can see that is hasn’t “exploded”, outside of crisis periods. Current spending rate is elevated about 25% over the 1990s period of restraint, but quite close to the 1980s.
You keep switching between flows and stocks and what you want your numerator and denominator to be, why wouldn't I just look at real spending and real debt numbers - ie. the number we ultimately have to pay interest on?
GDP % is only relevant if we are politically able to raise taxes.
Both of the charts I posted have GDP as the denominator (although I incorrectly said the first was “share of budget”).
I think it’s very important to use GDP as a denominator, because otherwise you’ll be stuck crying wolf, saying “debt always keeps going up” even during the good times.
There are a lot of people who simply don’t believe that the government budget needs a trim right now, because people have been continuously saying there was a debt crisis even when the financial situation was relatively favorable.
Because measuring things against GDP like this is completely meaningless.
If you use your brain for even the slightest moment it would be completely obvious that the sum total amount of a debit is a huge deal because of scale of the interest.
IANA economist, but if there were a debt crisis, it would ultimately be about the psychology of the investors who would buy government debt. They want to be very, very confident that they will be paid back (which is why they're willing to accept a low interest rate).
If those investors are satisfied with a return to a late-80s fiscal posture, then great. But if they're worried that spending would just creep up again once the pressure is off, they might "demand" further cuts.
In particular, investors often like to see the contrast of infrastructure development (investing in future GDP), as opposed to paying day to day operating costs, retirements, interest on debt (never mind larger debt as far as the eye can see), and other creative ways to prevent future GDP. And there is very, very little infrastructure development in US budgets.
The author took the CBO's budget projections and adjusted them for "false sunsets", i.e. the tax cuts that were supposed to expire before they were extended, and the fake spending cuts written into the law that will never happen, i.e. the FRA.
I was mistaken to say “share of budget”, because the chart I linked to is actually share of GDP, which hopefully isn’t affected by the problem you pointed out.
https://fred.stlouisfed.org/series/FYOIGDA188S
The situation is similar to what it was in the late 1980s, and it can mostly likely be managed with the same level of spending restraints we saw in response to that.