Despite dropping federal deficits in the last few years, Concord Coalition Executive Director Robert L. Bixby recently warned a Kansas City audience that this is no time for complacency about the nation’s fiscal problems.
“Keep in mind: A shrinking deficit still means a rising debt,” he said last week at a lunch program hosted by the Greater Kansas City Chamber of Commerce. Bixby also noted that deficits are projected to start rising again by 2016.
The federal debt now equals about 74 percent of GDP. The last time it was that high relative to the economy was shortly after the Second World War, and that debt was quickly brought down.
But Bixby said that very different dynamics are in play now, with more and more federal spending on auto-pilot rather than approved by Congress each year through the appropriations process. Federal revenue, meanwhile, is not projected to keep pace with spending.
Bixby warned that interest costs are likely to rise rapidly in the coming years for two reasons: additional government borrowing and higher interest rates.