When President-elect Biden begins rolling out his ambitious recovery agenda on Thursday, economists and policymakers will debate to what extent it should be constrained by the $21.6 trillion national debt he inherits from Donald Trump. Self-proclaimed “fiscal conservatives” want the federal government to pursue deep spending cuts after running an unprecedented $3.1 trillion budget deficit in 2020, which has left the government owing more money than our economy produces annually for the first time since World War 2. But many progressives are urging Biden to spend trillions more to bolster the post-covid economy, arguing that deficits are inconsequential in an era of low interest rates and inflation.
Going all-in on either approach could be catastrophic for the American economy if the advocates of doing so turn out to be wrong about the ramifications. The best course for Biden, therefore, is to balance the risks on both sides by prioritizing critical public investments today while preserving fiscal flexibility to operate in any macroeconomic environment tomorrow.
Read the full piece here.
