US Fiscal Deficit Exceeds Great Depression Levels

The US federal fiscal deficit has reached approximately 6% of GDP in the last three fiscal years. According to The Washington Post editorial board, the deficit as a percentage of the economy was larger than in any year of the 1930s, the period of the Great Depression.

Four members of Congress are attempting to set a goal to return the budget to a reasonable path. A resolution introduced by Republican and Democratic lawmakers stipulates that Congress should aim for a deficit of 3% of GDP by 2030.

As debt increases, the government loses the ability to spend more on defense or social programs. Interest payments on the debt already cost more than defense spending or Medicare last year.

Returning to a deficit of 3% of GDP would substantially help stabilize the debt-to-GDP ratio, which has increased from about 65% before the 2008 crisis to about 120% today.

However, as logical as the goal may be, achieving it will not be easy. Congress will have to address mandatory spending, mainly Social Security, Medicare, and Medicaid.