USA 2024 Elections Thread
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Mon Oct 24 20:39:58 PDT 2022
Ex-Treasury Secretary Warns Of Deficit "Doom Loop", Says Fiscal
Debates Need To Be "Back On The Table"
Former Treasury Secretary Larry Summers said in a recent Bloomberg
interview that fiscal debates need to be put “back on the table” as
surging borrowing costs risk a potential deficit “doom loop.”
Summers made the remarks during Friday’s edition of Bloomberg’s “Wall
Street Week,” in which he said that the Biden administration’s big
spending initiatives, including the student-loan forgiveness that
caused the monthly deficit to jump 562 percent, could shake investor
“If your deficit projection starts to get out of control and your
real interest rates start to rise rapidly, you can get into a kind of
doom loop,” Summers told the outlet.
“We’re going to need to be watching our own fiscal projections in
the United States very carefully.”
While the federal budget deficit is down to $1.38 trillion this year
from $2.78 trillion in fiscal 2021, it was 562 percent higher on a
monthly basis compared with September 2021. The monthly jump mostly
reflects Biden’s student debt forgiveness as several years’ worth of
costs were compressed into a single month.
‘Stagflationary Debt Crisis’
Another prominent economist who has warned about the risks of high
debt as borrowing costs rise is Nouriel Roubini, a professor of
economics at New York University’s Stern School of Business who got
the nickname “Dr. Doom” for his accurate prediction of the market
meltdown of 2008–09.
Roubini said in an opinion piece for Time magazine that under
conditions of much higher private and public debt levels now than in
the past, central bank rate hikes to tame soaring inflation carry a
major downside risk.
“Rapid normalization of monetary policy and rising interest rates
will drive highly leveraged households, companies, financial
institutions, and governments into bankruptcy and default,” he wrote.
Roubini expects the next crisis to be some combination of 1970s
stagflation and the 2008–09 debt crisis, predicting a toxic mix where
“the decade ahead may well be a Stagflationary Debt Crisis the likes
of which we’ve never seen before.”
It comes as Republicans have criticized the Biden administration’s
big-ticket spending and have been flagging the need for spending cuts.
“You can’t just continue down the path to keep spending and adding
to the debt,” House Minority Leader Kevin McCarthy (R-Calif.) said in
a recent interview on Punchbowl News.
The GOP lawmaker said that if Republicans win control of the House,
they should consider using debt-limit negotiations to pressure
Democrats to cut spending.
“And if people want to make a debt ceiling [for a longer period of
time], just like anything else, there comes a point in time where, OK,
we’ll provide you more money, but you got to change your current
“We’re not just going to keep lifting your credit card limit,” he
added. “And we should seriously sit together and [figure out] where
can we eliminate some waste? Where can we make the economy grow
‘Force as Much Spending Reduction’ as Possible
In a recent interview for The Epoch Times’ sister outlet NTD, Stephen
Moore, former senior economic adviser to former President Donald
Trump, blamed soaring inflation on the Biden administration’s massive
spending packages and said the only thing that will cool price
pressures is a GOP win in the midterm elections so they can pressure
Democrats to “stop the spending.”
Moore acknowledged that there are limits to what a
Republican-controlled Congress could do to rein in spending, as some
of it is on “automatic pilot” and can’t be stopped by a vote.
“Republicans should not over-promise,” he said. “They can stop new
spending, they can—in a fight over the debt ceiling—pull back some
spending, as we did with [former President Barack] Obama.”
He said a GOP win would likely mean more political friction in Washington.
“Neither side is going to be very happy,” he said.
“But the more the Republicans can bring spending and regulations
and taxes down, the stronger the economy.”
In order to tame soaring inflation, Republicans should “force as much
spending reduction” as possible, Moore argued.
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