10/24/2019

The debt is still out of control

At the start of every year, the Congressional Budget Office (CBO) publishes “The Budget and Economic Outlook,” a tome full of statistics, tables and charts.. . .

What we have is an inherently unstable situation, though we do not know — and probably cannot know — how or when the possible dangers will materialize. The basic instability arises because, as our national debt goes up, the capacity to service it goes down. If the economy’s growth rate, which is the ultimate source of debt repayment, were much stronger, the danger would not be so great.

But, of course, the economy’s growth rate has weakened. The largest threat is probably some sort of panic whereby investors lose confidence. They dump Treasury securities in financial markets, sending interest rates up and making the burden of debt even greater. This is hardly inevitable, but it is not impossible either. To believe otherwise is wishful thinking — imprudent at best, reckless at worst.

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