Although massive current spending in response to the COVID-19 pandemic seems justified, policymakers will have to address the mounting public debt once the crisis has passed. Policymakers will be strongly tempted to impose an interest-rate ceiling on financial institutions, but conditional tax increases would be preferable.
WASHINGTON, DC – The US federal debt-to-GDP ratio rose sharply during the 2008-09 Great Recession and continued rising thereafter, going from 62% in 2007 to 90% in 2010. By 2019, it had reached 106%, and the Congressional Budget Office was warning that the trust funds for Social Security and Medicare would be exhausted by 2028. Many economists argued that a debt-to-GDP ratio of 100% was already worryingly high, and that the future tax increases needed to reduce it would be massive.
WASHINGTON, DC – The US federal debt-to-GDP ratio rose sharply during the 2008-09 Great Recession and continued rising thereafter, going from 62% in 2007 to 90% in 2010. By 2019, it had reached 106%, and the Congressional Budget Office was warning that the trust funds for Social Security and Medicare would be exhausted by 2028. Many economists argued that a debt-to-GDP ratio of 100% was already worryingly high, and that the future tax increases needed to reduce it would be massive.