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The US is becoming the king of debt. It's a necessary risk

President Donald Trump is living up to his self-given nickname "King of Debt." On his watch, the United States has borrowed aggressively -- during the good times, and now the bad times.

Instead of whittling down the federal deficit when the economy was strong, Trump directed the federal government pile on even more debt to pay for massive tax cuts and spending surges.

That meant that the United States entered this crisis in rough financial shape. Debt-to-GDP stood at nearly 80% even before the coronavirus pandemic struck -- a rate more than twice as high as the historical average and double the level before the Great Recession.

Now, the national debt is exploding because Washington is being forced to rescue the US economy from its greatest shock ever. The Treasury Department said this week it will borrow $3 trillion this quarter alone. That's nearly six times the previous record, which was set in 2008.

Still, while the national debt is scary -- it now stands at nearly $25 trillion -- now is not the time to cut back on the borrowing.

Economists agree that the United States must continue to rack up debt to prevent a full-blown depression. Otherwise, there won't be much of an economy left to repay the debt once the health crisis is over.

Even deficit watchdogs are urging Uncle Sam to keep borrowing.

"We made a huge mistake being so in debt when the economy was strong," Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, told CNN Business. "But just because we were reckless and foolish going into the crisis, [that] doesn't mean we shouldn't borrow during it."

Of course, there will be long-term consequences for the mountain of debt Washington is racking up. Eventually it will mean higher interest rates, hotter inflation and likely higher taxes.



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Posted by Erin Burnett to ANT at May 6, 2020 at 7:38 PM

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