The economy is growing at 4.2 percent, the best in four years. The unemployment rate is down to 3.7 percent, the lowest since 1969. On the surface, this news looks fantastic. Wages are growing and Americans are spending. Have things ever been better?
While the Trump Administration is quick to tout the county’s economic successes, economists are warning Americans that this economic boom may be short-lived.
“In a sense, a good chunk of this very good number is a sugar high,” says Stan Veuger of the American Enterprise Institute, warning that the effects of a government spending spree coupled with the recent tax cuts will not be sustainable.
Like the house on Halloween that leaves a big bowl of candy on the front porch that says “take one piece,” Congress is allowing the US economy to stuff its bag full of tax cuts and spending increases without even the loosest of restraints. However, both parents and economists will be watching the side effects, and even warning signs, of sugar highs this Halloween season.
“The evidence is in front of our eyes that we’re bankrupt,” says Laurence Kotlikoff, a Boston University economics professor who previously ran for president on a platform of fiscal responsibility. “It’s not bankrupt in the future. It’s bankrupt right now.”
The United States is currently over $21 trillion in debt. A national debt that took just over 220 years to accumulate, is expected to see another $10 trillion tacked onto it over the next ten years, and double in the next 30 years. To put simply, federal spending is out-of-control and will dramatically affect young Americans’ futures.
While some economists argue that short term deficit spending, or stimulus, can provide a boost to the economy during a recession (such as the Great Recession), we are almost a decade past that point, at full employment, and will run a $1 trillion deficit this year. Even if government stimulus was justified to boost consumer spending then, it is difficult to find any reason for a budget busting stimulus now – other than stimulating election chances. Whatsmore, future taxpayers will have to pay for this generation’s excesses.
Former Chairman of the President’s Economic Council, Jason Furman, recently wrote that government deficits are not that effective because they create future tax liabilities that will one day have to be paid back by taxpayers. To add insult to injury, most government spending isn’t even going towards investment that future Americans will benefit from.
“In the second quarter of this year, investment spending by the federal government dropped below 1.4 percent of gross domestic product for the first time since the 1940s,” according to the latest data from the Bureau of Economic Analysis. “Overall federal spending, meanwhile, is at an estimated 20.9 percent of GDP in fiscal 2018, currently higher as a share of GDP than it has been for most of the post-World War II era. It’s just that investment in research and development, roads, bridges, transit systems, buildings, equipment, and such has been replaced with spending on Social Security, Medicare, Medicaid and other social insurance programs,” says Bloomberg.
The US economy is doing great – and that’s a good thing. But Congress and their constituents should be wary of prideful claims that we discovered the way to have our cake and eat it too. Soon, Halloween night will have children bouncing off the walls after their haul of chocolate and taffy. Let’s hope children are the ones crashing after their sugar high, not the economy.