« Increased spending versus tax cuts | Main | Don't forget the Fed »
March 02, 2009
Worrying about the long run
The federal government's actions to contain the recession, including assistance to the banking system and other sectors, tax cuts and the new stimulus bill will run up a tab of close to $2 trillion, most of which will be new government debt. Do we need to be concerned about the long-run implications of this debt on the economy? Listen
Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:
"Well, we do because importantly other parts of the federal budget are also driving us toward more debt, particularly those big three - what economists call entitlement programs - Social Security, Medicare and Medicaid. They are growing at very high levels, and if the tax situation stays the same, we will have to see the federal government borrowing more money to fund those programs. So if you put that borrowing in the future on top of the additional borrowing - the $2 trillion - you can obviously see where we are facing a big, big debt problem down the road. Now fortunately, people in the government are concerned about this, and they've mentioned this. In fact, the new director of the Office of Management and Budget has as much as said that, 'Look, once we get past this recession and the stimulus bill, we are going to have to tackle the structural focus in the federal government for increasing government debt.' So I think this will be the next big challenge for the government. Once we get over the recession, how do we corral, how do we limit the increase in government debt? Because without it, either that means other government programs get crowded out or we have significantly higher taxes."
Posted by Dave at March 2, 2009 08:00 AM