U.S. Budget Deficit: A Dangerous Game

As part of our Series “M” (money) program last night, Dr. Dennis Ippolito, SMU’s Chairman of Political Science, and senior research economist Carlos Zarazaga of the Dallas Fed, offered remarks about the domestic and global sides of the U.S. budget deficit. Some key takeaways emerged, particularly in the case of ‘kicking the can down the road’:

• Slower economic growth will become the new normal as long as markets, businesses and investors believe a higher tax regime will be required to deal with the outsized deficit.

• Countries that near the 90% debt to GDP ratio face slower growth, sometimes up to a 2% reduction to GDP.

• The U.S. is now travelling at a slower growth trajectory because of debt (and spending).

• A real fiscal picture needs to be presented to the public as happened many decades ago from leaders. The politicization of the budget and the restoration of budget discipline should not be party platforms but an underlying responsibility of lawmakers and leaders.

• The U.S. budget deficit is a liability to present and future generations, and to our economic prowess, standing and leadership across the globe.

The slides which were presented can be viewed on the DCFR slideshare page.

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