At a Senate Budget Committee meeting this morning, CBO Director Doug Elmendorf warned that the US faces “daunting economic and budgetary challenges” ahead:
He said the longer the nation waits to reduce budget deficits the larger the changes will need to be — and the more “disruptive” these changes will be for the economy. …
But Elmendorf has said that under a plausible scenario, the U.S.’s cumulative deficits over the next decade could hit $12 trillion — not $6 trillion.
In his testimony, Elmendorf said policymakers face a “difficult tradeoff” between implementing deficit reduction during a time when the economy is still struggling to gain strength versus delaying deficit cuts until the future when more far more draconian changes are needed. …
At his briefing Wednesday, Elmendorf said that if American fiscal policy is unchanged, the U.S.’s net interest costs alone over the coming decade could reach $5 trillion.
Elmendorf repeated there is no way to know for sure when American fiscal policy reaches a “tipping point” in which a major crisis would ensue.
But he said that investors could “become increasingly nervous” if the U.S.’s fiscal trajectory doesn’t change.
Senator Ron Johnson asked Elmendorf to explain in layman’s terms what a debt crisis would look like to a family. His response is below:
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