Fumbling Biden Administration Ignoring Dire Economic Outlook
For many years, those concerned with fiscal conservatism have raised anxieties over the escalating deficits and debt of the United States. The prosperous voices, among them my own, have staunchly refuted this stance, iterating that stringent economic policies frequently inflict more damage than solutions. Yet, it is with a sense of growing concern that I, alongside several former doves, have crossed over to adopt the hawkish viewpoint. This dramatic leap is in response to the mounting peril that confronts our nation’s financial forecast.
Our national financial strategy has led us into a precarious situation and ignoring the increasingly dire situation we face will inevitably lead to an economic upheaval. This form of financial disaster, characterized by mounting debt and a shrinking economy, is a recurring theme in developing and lower-income nations.
Should our administration be compelled to attend to spiralling debts via the swift yet punitive methods of severe spending cuts or tax elevations, the eventual outcome will be a crippled economy and a decrease in the average person’s standard of living. It is therefore of utmost urgency that we act swiftly and decisively to avert this impending catastrophe.
The sustainability of our nation’s debt is a complex function of three vital parameters – the magnitude of our yearly deficits, the interest rate on the debt pile-up, and the pace at which our economy expands.
Olivier Blanchard, a leading authority in this field, has convincingly demonstrated that it is possible for a government to peacefully coexist with moderate budgetary shortfalls, as long as the rate of economic growth outpaces the interest rate on its accumulating debt. This is analogous to the financial journey of a student securing loans to fund his college education.
As long as the student refrains from excessive borrowing, and ensures that their post-graduation salary growth outstrips the rise in their student loan dues, they would be able to keep up with the monthly repayments with relative ease. But the situation gets dramatically skewed if the pendulum swings the other way.
If their borrowing reaches extremes and their student loan debt ascends at a speed faster than their income, their financial stability can swiftly tumble. Unfortunately, that is the grim narrative our nation is grappling with at the moment.
