The Deficit Is Going to Double from Last Year and Economists are Clueless
Only a few months ago I wrote that part of the reason our economy was staying out of recession is that the amount of money the government is borrowing this year is up 50% from last year. Well, only a few months later, it looks like the deficit is going to be up ONE HUNDRED PERCENT from last year. Going from $1 trillion last year to almost $2 trillion this year.
Again, no wonder the economy is doing just fine. All this borrowing is just one big stimulus to the economy.
However, if you ask top economists what they think, they are clueless. In fact, they are surprised that we have such a good economy and such a big deficit. They don’t see any connection between a good economy, despite rising interest rates, and a big deficit.
In fact, Jason Furman, who was Chairman of the Council of Economic Advisers in the Obama administration and now a Harvard professor, said in a recent article in the Washington Post:
“To see this in an economy with low unemployment is truly stunning. There’s never been anything like it,” Furman said. “A good and strong economy, with no new emergency spending — and yet a deficit like this. The fact that it is so big in one year makes you think it must be some weird freakish thing going on.”
Some weird, freakish thing going on??? Not at all. Instead, he doesn’t seem to understand that the big deficit is WHY we have such a good and strong economy. The full Washington Post article is at the link below.
https://www.washingtonpost.com/business/2023/09/03/us-debt-deficit-rises-interest-rate/
But it’s not just academic economists who don’t see the connection between big deficits and a good economy, it Wall Street economists as well. Many seem to think we are headed for a recession and completely ignore the incredibly stimulating effects of massive government borrowing.
More importantly, this isn’t a one-off stimulus that will die down. Instead, the Congressional Budget Office expects to see a continuous run of $2 trillion deficits every year for the next ten years. And since they were so wrong on how big the deficit would be this year, you have every reason to expect future deficits will be higher than they project.
All good for the economy and stock market until we can no longer print money to support government borrowing without causing double digit inflation and double-digit interest rates.