A new threat to the troubled U.S. economy has been identified, and it’s called “fiscal space,” says a new report in Joseph Farah’s G2 Bulletin.
It’s the “amount of room available for additional government borrowing,” and while it isn’t likely to create a catastrophe in the immediate future, it could start impacting mid- and long-term planning, according to a report from the Congressional Research Service.
The federal government report was posted online by the Federation of American Scientists.
It was written by Grant Driessen, an analyst in public finance, and Marc Labonte, a specialist in macroeconomic policy.
They explained, “Policymakers are interested in the concept of ‘fiscal space,’ or the amount of room available for additional government borrowing, as they discuss plans for the federal budget.
“Though budget deficits have declined in recent years, debt held by the public was estimated to equal 77 percent of gross domestic product at the end of FY2016, which would represent the highest ratio since FY1950.”
The authors said that assuming “a continuation of low interest rates, it is unlikely that fiscal space will constrain short-term federal operations, but projections indicate that fiscal space may be a binding constraint in the medium- and long-term outlook.”
The national debt during Barack Obama’s eight years in office nearly doubled to about $20 trillion.
But experts note that figure doesn’t include numerous long-term commitments for expenditures.
The analysts explained that the “legacy of persistent budget deficits in the last several decades has been a steady accumulation of publicly held debt relative to GDP.”
“Debt held by the public declined after World War II but has since increased considerably, rising from 23.1 percent of GDP in FY1974 to 77 percent of GDP in FY2016. This trend included a significant rise in debt held by the public during the 2007-2009 Great Recession and subsequent recovery, from 35.2 percent of GDP in FY2007 to 70.4 percent of GDP in FY2012.”
While the federal government has no statutory balanced-budget requirement, the report notes, “persistent deficits nevertheless face a long-term binding constraint – the willingness of investors to finance them.”