High time Americans care about national debt, says Baker Institute expert
HOUSTON – (Feb. 19, 2020) – The Congressional Budget Office (CBO) recently released its long-term U.S. government debt projection, and the outlook is cause for concern, according to an expert at Rice University’s Baker Institute for Public Policy.
The 30-year debt projection was revised upward from 144% of gross domestic product to 180% of GDP, said Jorge Barro, fellow in public finance, who outlined his insights in a blog post, "When Will Americans Care About Government Debt?" Barro is available to speak with news media about the issues at play.
"The good news is that the economy shows no signs of strain from this unsustainable debt path," Barro wrote. "The bad news is that the executive and legislative branches also show no signs of willingness to work together to resolve the budget problem. This political gridlock leaves many questions regarding how an impending debt crisis might play out over the foreseeable future."
For years, Americans have been warned about the dangerous macroeconomic consequences of rising debt, Barro said.
"Standard economic theory predicts that government debt issuance crowds out private investment, driving up interest rates and weakening the economy," he wrote. "Nevertheless, U.S. federal debt has risen to levels not seen since the aftermath of World War II. Meanwhile, interest rates have steadily declined, and the economy continues on its longest expansion on record. With debt expected to continue soaring over the next 30 years, many are beginning to wonder how large debt can grow before it reaches a breaking point."
According to historical reference and current CBO projections, policymakers have about 10 years to resolve federal debt growth, Barro said.
"By 2030, interest payments are expected to approach the same critical level that existed in 1990 when the president and Congress worked together to resolve the rising debt costs of that era," he wrote. "Policymakers might continue ignoring debt growth for now, but the political risk of making a campaign promise to reject higher taxes or expenditure cuts will steadily rise until this debt problem is resolved."
For more information or to schedule an interview with Barro, contact Jeff Falk, director of national media relations at Rice, at jfalk@rice.edu or 713-348-6775.
-30-
Follow the Baker Institute via Twitter @BakerInstitute.
Follow the Baker Institute’s Center for Public Finance via Twitter @Baker_CPF.
Follow Rice News and Media Relations via Twitter @RiceUNews.
Related materials:
Blog post: https://blog.bakerinstitute.org/2020/02/17/when-will-americans-care-about-government-debt
Barro biography: www.bakerinstitute.org/experts/jorge-barro
Baker Institute Center for Public Finance: www.bakerinstitute.org/center-for-public-finance
Founded in 1993, Rice University’s Baker Institute ranks as the No. 2 university-affiliated think tank in the world. As a premier nonpartisan think tank, the institute conducts research on domestic and foreign policy issues with the goal of bridging the gap between the theory and practice of public policy. The institute’s strong track record of achievement reflects the work of its endowed fellows, Rice University faculty scholars and staff, coupled with its outreach to the Rice student body through fellow-taught classes — including a public policy course — and student leadership and internship programs. Learn more about the institute at www.bakerinstitute.org or on the institute’s blog, http://blog.bakerinstitute.org.