by Peter Schiff, Schiff Gold:
In fiscal 2018, the national debt expanded by more than $1 trillion. According to data released by the Treasury Department, it was the sixth-largest fiscal-year debt increase in the history of the United States. A combination of increased spending along with shrinking revenues continues to expand the federal deficit and balloon the national debt.
GOP apologists insist the revenue shortfalls caused by tax cuts are temporary and economic growth spurred by tax relief will eventually turn things around. Tax relief is great, but without substantive government relief in the form of spending cuts, the promised economic growth won’t likely materialize.
As we’ve pointed out on a number of occasions, studies have shown that GDP growth decreases by an average of about 30% when government debt exceeds 90% of an economy. US debt already stands at around 105% of GDP. Ever since the US national debt exceeded 90% of GDP in 2010, inflation-adjusted average GDP growth has been 33% below the average from 1960–2009, a period that included eight recessions.
But why do high levels of government debt retard growth?
In a nutshell, the debt distorts the economy. An article by economist Chris Edwards published at FEE highlights three ways upward spiraling government debt distorts the economy and puts downward pressure on growth.
Even the generally conservative Congressional Budget Office recently warned about the impact of the federal debt saying, a “large and continuously growing federal debt would … increase the likelihood of a fiscal crisis in the United States.”
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