Economists Question G.O.P. Bill: Why Increase the Deficit in Good Times?

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Source: NYT


".... The worry, long expressed by Mr. Romer and other economists, is that investors will eventually balk at lending the government money, or will demand punishingly high interest rates for doing so. That could set off a downward spiral in which rising interest payments add further to the debt, making investors increasingly reluctant to lend and eventually driving up the cost of government borrowing even higher.

No one knows exactly when that will happen. But economists warn that by increasing the debt during a period of relative economic strength, the government is running the risk that the tipping point will come at the worst possible moment, when the government needs to run large deficits to respond to a war or another crisis.

Already, the federal government spends more each year on interest on the debt than it does on national defense. If the House bill becomes law, federal debt could exceed 125 percent of G.D.P. by 2034, according to independent projections. That would be the highest since the country’s founding.

.... There are signs that investors’ appetite for U.S. government debt could at last be waning. Yields on long-term government debt have risen in recent weeks as investors have expressed mounting concerns about the cost of the Republican tax bill when Mr. Trump has waged trade wars with nearly all the countries with which the United States does business. Typically a safe haven that investors flock to during times of stress, the U.S. dollar has continued to drop against a basket of its peers even as the stock market has wobbled...."

Read more: https://www.nytimes.com/2025/06/02/business/government-debt-deficit-recession.html?unlocked_article_code=1.ME8.-Zmc.DeuRobwclp4M&smid=url-share

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Full article at link.