Forgotten But Not Gone: The Long-Term Fiscal Imbalance

Over the past few years, the U.S. long-term fiscal situation has improved somewhat and short-term deficits have come down. Perhaps as a result, policy makers have largely turned their attention away from dealing with fiscal issues. The fiscal problem may well be forgotten, but its not gone. Current debt/GDP ratios are the highest in U.S. history except for a few years surrounding World War II. The ratio is projected to rise further over the next decade, even if everything goes right from an economic and political viewpoint. And reasonable projections indicate continuing growth in the debt/GDP ratio, to unsustainable levels, over the long term. Even if boosting the economy is a short-run priority, policy makers should also be offering concrete plans for an eventual, substantial fiscal consolidation.