America’s dark fiscal future

April 2, 2018

by John McClaughry

I wish every American voter would digest the column by Greg Ip in last Thursday’s Wall Street Journal [3/29/18].  Here’s his opening line: “If you think the federal debt is bad, the bigger picture is worse.”

He starts by reviewing a report from Moody’s, the bond rating agency “The U.S., Moody’s report shows, is blessed with extraordinary advantages when it comes to borrowing. Yet it is about to experience a dramatic loss of financial freedom because it is shrinking its tax base just as interest expenses surge and social programs get harder to cut. It is like someone who borrows freely thanks to his rich parents but can’t keep a steady job and won’t curb his lifestyle.”

Moody’s and Ip agree that America’s credit rating is triple-A, and our economic prowess is without peer. But Ip adds, “those assets are all legacies of America’s past, and some are eroding: business dynamism by some measures and economic growth have both declined, and the population is aging. “Interest swallowed 8% of federal revenue last year. As interest rates return to normal and debt keeps rising, Moody’s thinks it will hit 21.4% in 2027. This severely limits the government’s flexibility to respond to emergencies.”

Ip quotes Maya MacGuineas, president of the Committee for a Responsible Federal Budget, “We’re in a full-blown era of free-lunch economics where no one says no to anyone anymore.”

Trust me: This can’t go on forever.

John McClaughry is vice president of the Ethan Allen Institute. 

{ 2 comments… read them below or add one }

Jack O'Callaghan April 5, 2018 at 1:23 am

I agree John- Greg Ip is a thoughtful and powerful writer. This is one of my favorites by him: https://blogs.wsj.com/economics/2016/10/03/why-climate-skeptics-should-support-a-carbon-tax/

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William Hays April 8, 2018 at 2:13 pm

“Ip-so-silly, no fact-o” may be on to something. I doubt if many Americans are ‘bond holders’, so why care? I would rather like interest rates to rise. My checking account only pays 0.2% monthly, and my CDs are now “up” to 1.0%. The government can always print more money, as the O’Bama administration did. Hell with the consequences!

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