Obama’s Debt Legacy: The president’s policies, left unchecked, could lead to a long-run growth depression

From Michael J. Boskin:

The financial crisis, deep recession, and anemic recovery have been accompanied by massive policy interventions. Their overall short-run impact on the economy remains controversial: Some claim these policies prevented a much worse recession, others that they delayed recovery.

What is clear, however, is that the public debt has exploded in this period. Policies that could rigorously be expected to strengthen short-term growth at reasonable long-run cost are justifiable, but virtually no attention has been paid to the long-run cost in most studies. Concern about such costs has the International Monetary Fund (IMF) pressing governments to gradually consolidate their budgets. This essay provides estimates of the harm to economic growth and future living standards if the growing debt-GDP ratio is not soon reversed.


Failing to rapidly begin bending the long-run debt-GDP curve down risks a growth disaster, whose severity could be much worse even than the recent deep recession and tragically anemic recovery. Left unchecked, it eventually risks a lost generation of growth, a long-run growth depression.

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