The title above comes from Mr. Martin Feldstein’s March 21, 2019 Op-Ed, “The Debt Crisis Is Coming Soon,” in the Wall Street Journal (WSJ). Mr. Feldstein is the former Chairman of the Council of Economic Advisers under POTUS Ronald Reagan, and is currently a professor at Harvard.
“The most dangerous domestic problem facing America’s federal government is the rapid growth of its budget deficit and national debt,” Mr. Feldstein writes.
According to the Congressional Budget Office (CBO), “the deficit this year/2019, will be $900B, more than 4 percent of the gross domestic product (GDP), and more than the entire U.S. defense budget. “It will surpass $1T in 2022,” Mr. Feldstein warns. “The federal debt is now 78 percent of U.S. GDP,; and by 2028, it is projected to be nearly 100 percent of GDP. All this will have serious economic consequences, and the CBO understates the problem,” he added. The CBO “has to base its projections on current law — in this case, the levels of [current/projected] spending, and future tax rules and rates that appear in law today.”
“The levels don’t match realistic predictions,” Mr. Feldstein observes. “Current law projects that defense spending will decline as a share of GDP, from a very low of 3.1 percent now, to about 2.5 percent over the next ten years. None of the military and civilian defense experts to whom I [Mr. Feldstein] have spoken to, believe that will happen, given America’s global responsibilities, and the need to modernize U.S. military equipment. It is likelier that U.S. defense spending will stay around 3 percent of GDP, or even increase in the coming decade. And, if the outlook for defense spending is increased, the Democratic House majority will insist that the non-defense discretionary spending should match its [defense spending] trajectory.”