The Ford School of Public Policy hosted a virtual discussion on the sustainability of the United States’ federal deficit Wednesday night. The deficit is posed to reach a record $3.3 trillion in 2020, largely due to increased government spending as a result of the COVID-19 pandemic.
The last time the U.S. government experienced a budget surplus was 2001, and the deficit has grown every year since 2015.
Betsey Stevenson, a professor of public policy and economics at the University, moderated the event. Stevenson said analyses of both presidential candidates’ platforms indicate that their policies would lead to rising debt.
“What really struck me is, it’s been noted that Trump grows the debt through tax cuts and spending on the Space Force, infrastructure and veterans, while Biden adds to the debt by spending on infrastructure, education and caregiving, health care, kids, families, while raising taxes on the rich,” Stevenson said. “Should we think why we’re getting into debt as being somehow important to consider when we’re thinking about the level of debt?”
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said the U.S. should be borrowing heavily to mitigate economic losses from the pandemic.
“Now, here we are in the inevitable downturn, though it is certainly one that is massively different than I would have imagined in terms of what brought it on,” MacGuineas said. “This is the moment borrowing was made for.”
She said the country can focus on dealing with national debt once the economy is strong enough again.
Lawrence H. Summers, former U.S. Secretary of the Treasury, advocated for expansionary fiscal policy, meaning policies that use government spending to promote economic activity.
“If we make the necessary investments, and we do it sensibly, they will grow the GDP enough that we’ll generate enough tax collections that we won’t actually have a rising debt to GDP ratio,” Summer said.
MacGuineas said the national budget is a reflection of our national priorities.
“I think most anybody who looks closely at how we’re currently spending our dollars … would probably not think we are spending it in the right way,” MacGuineas said. “I would certainly count myself in that camp.”
The panelists went on to discuss when the government should pivot from spending in support of the economy to reducing expenditures.
“You have to fundamentally make a decision,” Summer said. “Should we be focusing on the fact that at some point in the future, we might have fully employed resources, we might have higher interest rates and we might find it a good time to smooth the federal debt? Which is the right priority?”
MacGuineas said in unprecedented and unpredictable times — such as a world-historic pandemic — certainty “is the cheapest form of stimulus of the economy” because then all parties understand the situation.
“One of the keys in all of (the uncertainty) is making sure that you’re not excessively vulnerable in any way,” MacGuineas said. “What we are trying to do is balance the fact that we are on an unsustainable course … with the various situations in the economy right now … also with the pressing urgent needs for further investment.”
The panelists also noted the politicization of the national debt. MacGuineas criticized the Republican Party for its ongoing rounds of tax cuts, while she said the Democratic Party has neglected investment in other sectors in favor of growth in health care and retirement policies.
“It’s more a political economy game than it is real policy for so many people who are in the political arena,” MacGuineas said.
Summers agreed with MacGuineas.
“I’m for putting policy over politics,” Summers said.
Daily News Contributor Justine Ra can be reached at rjustine@umich.edu.
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