Washington, D.C. — The U.S. economy finds itself at a crossroads of overlapping challenges. With long-term productivity and economic growth low and income and wealth inequality high, and the country faces a series of challenges: from collapsing economic security for middle- and working-class Americans to climate change and more. A new report from the Center for American Progress makes the case that these challenges will undoubtedly require the deployment of significant federal resources, since the private sector has failed to address them, and concludes that the United States can meet these challenges—and others—while taking a serious approach to debt and deficits.
“The question is not whether the country can afford more debt—it can—but what the additional debt is used for. We need to prioritize things that have proven to speed up growth and reduce excessive inequality over wasteful tax cuts for the rich,” said Christian Weller, CAP senior fellow and co-author of the report.
CAP’s report synthesizes the literature on debt and deficits and concludes that while debt and deficits could pose risks in the future, current levels of debt and deficits are manageable if the United States is using its fiscal capacity to implement policies that foster strong economic growth for society as a whole—such as infrastructure spending, education, and social insurance to reduce inequality. In other words, the government has the room to increase spending and reform taxes while putting a lower priority on deficit reduction, provided those investments are sustainable policies that enhance economic prosperity.
Alternatively, wasteful tax cuts aimed at the wealthy and corporations, such as Tax Cuts and Jobs Act enacted in 2017, have created massive, long-term deficits without clear, tangible benefits. These structural deficits may actually pose a drag on the economy, because tax cuts in recent decades predictably did not translate into faster growth and higher wages, and likely worsened already high income inequality.
Click here to read: “Budgeting the Future” by Christian E. Weller, Sara Estep, and Galen Hendricks
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