The Future Is Now: A Balanced Plan to Stabilize Public Debt and Promote Economic Growth

President Obama recently released his budget plans for the coming year under which the budget deficit would account for only 5.2 percent of the budget deficit. The issue with this is that allocating such a small amount of money at combatting the deficit will not help and furthermore will cause it to grow at an alarming rate. Under the proposed budget, the public debt to GDP ratio would reach 70 percent by 2011, 90 percent by 2020, and would break the World War II record of 109 percent just a few years after.
Some don't see any large issue with a large deficit and in fact think that such a deficit can be healthy and help us out of this time of crisis. The author however points out some crucial issues that disprove this theory.

1. As the economy recovers, excessive public debt competes with private sector demands for capital, raising interest rates for all borrowers, including the government, and leading to slower economic growth.
2. As debt accumulates and interest rates rise back to historical levels (or beyond), interest payments on the federal debt will soar, competing with other important priorities.
3. Because so much U.S. public debt is held by non-American individuals and institutions, interest payments on that debt represent a substantial transfer of income and wealth out of the American economy.
4. Excessively high debt levels lead to increased risk of a fiscal crisis in which investor concerns lead to abrupt spikes in interest rates and a vicious debt spiral. By the same token, such debt levels reduce the federal government’s ability to respond fully and flexibly to severe crises.

I concur with the author and feel that tackling our ever growing deficit should be a priority at trying to face this recession head on and defeating it.