Risks and Threats from Deficits and Debt | Committee for a Responsible Federal Budget

Debt, deficits do matter and continued deficit spending will hurt all of us. All the things the American left tells us we deserve, we need, must be paid for – by all Americans.

Excessively high debt levels are damaging for many reasons. High debt levels:

Threaten economic vitality: The recent surge in deficit spending has contributed to rapid near-term inflation and over time will result in higher interest rates, slower economic and income growth, and a small but increased risk of fiscal crisis.

Place a strain on the budget: The federal government currently spends as much on interest payments as it does on most of our safety net programs combined, and interest is projected to become the largest government expenditure within the next 30 years. As interest and mandatory spending dominate a greater share of the budget, our government’s ability to invest in new priorities will be limited.

Create geopolitical challenges and risks: With large portions of our debt held by foreign investors, a substantial share of our national income goes abroad. We are consequentially left with fewer financial tools to manage conflicts with other countries when they have increased leverage over our economy.

Make responding to new emergencies more challenging: High deficits and debt – particularly if coupled with high inflation or interest rates – make it harder to borrow in response to a recession, pandemic, war, or other legitimate emergency.

Are unfair to younger and future generations: The federal budget already favors consumption on seniors over investment in children. Failing to address rising debt also leaves future generations with an additional fiscal and economic burden.

Given these very real threats and risks, policymakers should pursue the appropriate tax and spending adjustments to bring the fiscal situation under control.

Some fringe advocates of spending with abandon support MMT:

Modern Monetary Theory and the National Debt

Over the past few years, Modern Monetary Theory (MMT) – a fringe economic theory that argues the government can, should, and effectively does print money to finance deficits – has gained growing prominence. The basic idea behind MMT is that fiscal policy, rather than monetary policy, should manage the macroeconomy and that there is no reason to worry about debt sustainability. Instead, the theory states, deficit spending should continue until the point that the economy is at capacity and substantial inflation emerges.

While MMT is appealing as a political excuse to brush aside the tradeoffs involved in budgeting, it makes little sense either in theory or in practice.

On the theoretical side, MMT rightly recognizes that economies that borrow and print in their own currency can never be forced into default, but it misunderstands the relationship between borrowing, interest rates, demand, investment, and economic growth. For example, some MMT advocates have theorized that higher interest rates could boost demand for goods and services rather than crowd out investment.

On the practical side, MMT implicitly relies on Congress and the President to substantially raise taxes or cut spending – without help from the Federal Reserve – in order to fight bouts of inflation. There is little evidence of willingness to enact large abrupt tax increases or spending cuts in periods of high inflation.

In fact, advocates of MMT have offered virtually no fiscal solutions to recent inflation, and in many cases, they have suggested further fiscal expansions.

MMT has widely been panned by economists on the left and right, ranging from Paul Krugman to John Cochrane.

Its proponents often articulate a contradictory framework that doesn’t withstand even the most basic scrutiny.

While MMT does help explain some basic insights about the constraints of an economy’s productive capacity and the technical ability of a government to borrow, it is of little use in understanding how to analyze or manage an economy or government budget.

Source: Risks and Threats from Deficits and Debt | Committee for a Responsible Federal Budget


  1. We can grow our way out of this DEBT problem, but the politicians and people would never agree to do it. It would take a total government spending freeze for five years. No new spending at all. SS, SSI, Welfare, pension, would all have there monthly benefit frozen at current level.
    By year six the economic growth would of produced a budget surplus and we could start paying down some of the debt. We would no longer need to add to the debt each year because of the budget surplus.


  2. “ All the things the American left tells us we deserve, we need, must be paid for – by SOMEONE ELSE.”

    Up to now, the petro dollar has allowed the U.S.A. to force other countries to subsidize its inflation. The attempt to use the international monetary system to punish the Russians for objecting to NATO encroachment in Ukraine may have been the straw that broke the camels back. Once other countries decide to cease subsidizing our inflation, we may be subjected to a depression. Given the reaction of India, China, Brazil, Saudi Arabia and others, we may be at a tipping point.


  3. Your headline is inaccurate.

    It says: “Debt, deficits do matter and continued deficit spending will hurt all of us. All the things the American left tells us we deserve, we need, must be paid for – by all Americans.”

    It should say: “Debt, deficits do matter and continued deficit spending will hurt all of us. All the things the American left tells us we deserve, we need, must be paid for – by SOMEONE ELSE.”

    So long as Americans believe someone else can/will/must pay, this crap will continue.

    We should have a vote each election:

    Today, because Congress anticipates we will have $1+ Trillion of annual deficits each year for the forseeable future (every one of the next ten years and beyond), Congress has decided that those those too young to vote and generations yet unborn are to fund the $30+ Trillion accumulated national debt and should have to pay confiscatory taxes so as to shore up Social Security and Medicare finances for the Baby Boom, Gen X, Millennial and Gen Z workers.

    Do you agree, and if not, who do you think should be financially responsible for these entitlements and commitments:
    A. Congress has it right, tax those too young to vote and generations yet unborn as necessary to fund my entitlements.
    B. Default on those debts and curtail/reduce my Social Security and Medicare benefits to match the amount of taxes.
    C. Tax “Rich” Americans (e.g., add a 5% (or more if necessary) per year wealth tax to apply to all wealth in excess of $500,000 per household, $250,000 for all singles with wealth in excess of $250,000)
    D. Tax “High” income Americans (e.g., add a 20% (or more if necessary) income tax surcharge on all households with income > $400,000 a year, and singles with income > $200,000)
    E. Other _________________________________________


  4. The deficit can be controlled but the debt may never be solved. We can just sell off a few national parks and some federal buildings to keep going.
    In the meantime, it’s time to enjoy Thanksgiving. Happy Thanksgiving to all.


    1. I vote for keeping the parks and selling the buildings. Layoff the government workers who worked in those buildings to save additional money. Apparently, the SEC isn’t doing a good job this month so maybe we can start with them as long as we don’t get paid in digital currency for those buildings.


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