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Karl W. Smith: How America can get its debt back under control

2 weeks ago 23

With its $33.7 trillion of debt and trillion-dollar budget deficit, the U.S.’s deteriorating fiscal situation is impossible to ignore. To simply balance the budget, a 29% across-the-board cut in spending would be necessary, even if the tax cuts enacted by the Trump administration are allowed to expire at the end of 2025.

Rising interest rates have made the situation even worse. Analysis by Bloomberg Economics’ Maeva Cousin and David Wilcox shows that what appeared to be a sustainable debt situation just a few years ago has become thoroughly unsustainable. No wonder Fitch Ratings joined S&P Global Ratings in stripping the U.S. of its AAA credit rating, and Moody’s Investors Service warned it may do the same.

But while everyone is focused on the spending side of the equation, perhaps the way out of this debt quagmire is on the economic side.

In that sense, the years immediately following World War II offer some valuable lessons.

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