WKU economist says uncertainty about debt still dogs U.S. Congress and economy
08/02/2011 05:19 PM
Western Kentucky University economist Brian Strow isn’t optimistic about the reducing the national debt in the future, even as Congress came to a deal over raising the debt ceiling and slashing spending.
Strow said on Monday’s edition of Pure Politics that the new debt deal doesn’t address tax reform or Social Security and Medicare reform, which Strow said are major issues affecting the debt.
Strow said because the federal government runs an annual $1.5 trillion deficit, a $2.4 trillion dollar reduction over the next ten years hardly makes a dent.
“Projecting that forward over the next ten years, so out of the next $15 trillion dollars they wanted to borrow, they said well we will only borrow $14 trillion of that. So it’s a fairly small piece. But you saw even with a small piece to get any deficit reduction, you know it was almost Armageddon for the economy,” Strow said. (see the 1:30 mark of the clip)
Strow said beyond the deal over raising the debt ceiling, the long-term uncertainty about the economy and the growing national debt would remain.
“We have the broader uncertainty of can the U.S. government, in any meaningful sense, reduce deficit spending, not necessarily next year, but five, ten, twenty years down the line, can we get the national debt under control or do we turn into a Greece type of situation?” Strow said. (see the 2:40 mark of the clip)
But he added he has doubts about whether the political will exists to get any type of big reduction deal. He said there aren’t enough centrists in office who are calling for the major reductions.
Strow has been an economics professor at WKU since 1999 and ran for Bowling Green mayor in 2008.
President Obama and House and Senate leadership compromised on a plan that raises the debt ceiling and avoids the Aug. 2 default deadline. The measure passed the House Monday and the Senate on Tuesday. Among the highlights: *The proposal cuts spending by about $2.4 trillion dollars over the next 10 years. *The deal doesn’t raise taxes or restructure Social Security or Medicare. *As part of the deal, a new Congressional committee will be formed to recommend a deficit-reduction proposal by Thanksgiving. *The debt ceiling will be raised in two steps, the first step would be in the $900 billion dollar range, with $400 billion added immediately to avoid default. *A second step would be an increase of between $1.2 trillion to $1.5 trillion dollars.
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