US budget gap over 20 years a worry
Print Edition
The biggest fiscal challenge facing the US is the size of projected deficits in the 2020s and 2030s, according to a survey of business economists.
The National Association for Business Economics surveyed 220 of its members in July and August. The survey found that members were more concerned about the size of deficits in the next two decades than current deficits or deficits over the next 10 years: 43 percent of the economists named budget gaps in the 2020s and 2030s as the top fiscal challenge, compared with 37 percent who chose projected deficits over the next 10 years.
The policy survey found no consensus on the best way to address those deficits.
The NABE said 39 percent of those surveyed felt the best way to address the deficit-to-gross domestic product ratio in the next few decades is a mix of spending restraint and increased revenue. It said 32 percent believe the best single tool would be greater spending restraint, and 20 percent said enacting policies designed to encourage economic growth would be the best tactic.
Ballooning costs for safety net programs as the US population ages may result in rising long-term budget deficits.
The NABE said there is broader agreement about monetary policy, as a majority of panelists think the Federal Reserve’s current policy is “about right.” But the respondents widely diverged on when they think the central bank will stop its policy of buying bonds to prop up the economy.
The Fed’s bond buying has kept US interest rates near record lows. But talk about when the Fed will slow or stop the program has made the financial markets volatile.
About 39 percent of respondents think the Fed will begin slowing the program in the fourth quarter of this year. About 7 percent think it won’t happen until 2015 or later. About 39 percent think the Fed will wait until 2015 or later to begin raising its interest rate targets, its tool to balance economic growth and keeping inflation in check.
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