Policymakers should not delay, since the economic consequences, particularly the impact on individuals in or planning retirement, would be pronounced and severe.Recent research confirms the dangers posed by high levels of government debt. Current spending and debt are dangerously high, and future spending and debt are on track to rise even higher in large part due to increasing entitlement spending.Academic research shows that advanced economies like the United States are at risk of significant and prolonged reductions in economic growth when public debt reaches levels of 90 percent of GDP.The Congressional Budget Office predicts that interest costs on the debt will more than double before the end of the decade, rising from 1.4 percent of GDP in 2013 to 2.9 percent as early as 2020. High levels of U. public debt could push interest rates even higher with severe impacts for the American economy. The government could, through the Federal Reserve, inflate the money supply.
The implications would be severe and pronounced for all Americans, but most especially for the poor, the elderly, and the middle class. Growing federal debt also would increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage the budget and the government would thereby lose its ability to borrow at affordable rates. federal spending in 2013, combined with depressed receipts from a weak economy, is on track to result in a deficit of 0 billion.Reinhart, Reinhart, and Rogoff examined over 110 years of economic data to conclude that advanced economies whose debt levels reach 90 percent of GDP face much slower economic growth. In 2009, Carmen Reinhart and Rogoff wrote called “a magisterial work on the causes and consequences of crises stretching back 800 years.” Their conclusions were based on a vast new accumulation of cross-country data, covering 66 countries across all regions of the world and spanning eight centuries.This dataset made it possible to study country debt episodes and crises much more comprehensively.Families may then have to delay purchasing their first home and other means of building financial security.For many Americans, the dream of starting a business would no longer be in reach.
Higher interest rates have a real and pronounced impact on the lives of ordinary citizens and translate into less investment and thus slow growth in the rest of the economy.