Missed Opportunity Costs

Blog Post
Wednesday, October 09, 2019

On Facing the Future, Concord Coalition Executive Director Robert L. Bixby and Senior Advisor at the Penn Wharton Budget Model Diane Lim joined me to discuss missed opportunity costs created by a large-and-growing national debt, perennial budget deficits and interest on the debt. 

“We are kind of ‘business as usual’ in terms of the rise in deficit spending and projected increase in debt as a share of GDP,” Lim said. “What is troubling about that is that we are seeing this path of continually-rising deficits as a share of GDP according to CBO at a time when the economy is quite strong.”  

Lim also said that, even with abnormally-low interest rates, interest costs are still projected to rise as a percent of GDP because the amount of debt the nation is accruing is adding to overall interest costs. 

Such trends can and have led to missed opportunity costs. 

“If the government is choosing to borrow to finance a particular increase in spending or a tax cut, that is moving resources away from possible use in the future to the present,” she said. “The problem with that is, once you make that decision, whatever you would have done otherwise had you saved it for the future is a missed opportunity and you can’t get it back.” 

Lim added that the cost of channeling resources away from future investments and into current consumption will compound over time. She saw that as a problem due to our changing economy and labor force and a need for investment in human capital. 

Hear more on “Facing the Future.” I host the program each week on WKXL, NHTalkRadio.com (N.H.), and it is also available via podcast. Join me and my guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders, elected officials and candidates for public office. Past broadcasts are available here. You can now subscribe to the podcast on iTunes, Google Play or through RSS.