America should debate its broken fiscal future

ONE of the most important issues facing the country has been conspicuously absent from the US presidential contest – and got only the most superficial mention at Tuesday (Sep 10) night’s debate. Democrat presidential candidate Kamala Harris and her Republican counterpart Donald Trump apparently agree that unsustainable public borrowing is not their concern. In fact, both are proposing to make the problem worse.

Trump’s fiscal plans – if you can call them that – are certainly more reckless than the vice-president’s. But both are promising tax cuts and spending increases that would deepen projected budget deficits and push the rising trajectory of public debt on to an even higher path. This literally cannot go on much longer. If Washington refuses to change course, financial markets will eventually force its hand, and the crunch that follows will be brutal.

As things stand, the budget deficit is on track to stay at roughly 6 per cent of gross domestic product over the coming decade – enough to raise net public debt from a little under 100 per cent of GDP now to more than 120 per cent in 2034.