The U.S. government is running out of room on its balance sheet, and few in Congress seem to grasp how little breathing space remains. According to my latest estimates, the nation’s “fiscal space” – the gap between today’s debt and the level at which markets would begin to doubt our solvency – has shrunk to 61 percent of GDP, down from roughly 73 percent in 2017. That erosion stems from a pandemic spending splurge followed by a lurch of Biden era stimulus, both piled atop already unsustainable spending promises. Unless lawmakers reduce the growth of federal spending by at least $1.4 trillion over the next decade, they won’t even restore the fiscal space we enjoyed eight short years ago, during President Trump’s first term, let alone put the budget on a genuinely sustainable path.
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