Between costly tax cuts and last week’s hefty spending bill, Congress is generating deficits that aren’t just large, they’re also unprecedented and potentially ominous. And even with some optimistic assumptions, President Trump’s latest budget proposal wouldn’t eliminate these deficits — in fact, the president is still angling to add a potentially costly infrastructure plan on top of current spending. But when the economy is this strong, deficits are usually small and shrinking, not ballooning back toward $1 trillion.
We are following a path that the country hasn’t traveled since World War II, with green economic pastures alongside rivers of red deficit ink. And that combination carries unique risks — not because the numbers are especially large (during the early years of the Obama administration, the deficit regularly exceeded $1 trillion) but because these deficits provide unneeded stimulus, which can overheat an economy already operating near full capacity. And in the process, they drain away funding that might be better reserved for fighting off the next recession.