Jeffrey Frankel, a professor at Harvard University’s
Kennedy School of Government, notes:
US will lack fiscal space to respond when
next recession comes
“During economic
upswings the budget deficit usually falls, at least as a share of GDP. But with
the US undertaking its most radically procyclical fiscal expansion since the
late 1960s, and perhaps since the second world war, the Congressional Budget
Office projects that the federal government’s fast-growing deficit will exceed
$1tn (£775bn) this year.
The US deficit is
being blown up on both the revenue and expenditure sides. Although a reduction
in the corporate tax rate was needed, the tax bill that congressional
Republicans enacted last December was nowhere near revenue-neutral, as it
should have been. Like the Republican-led governments of Ronald Reagan and
George W Bush, the Trump administration claims to favour small government but
is actually highly profligate. As a result, when the next recession comes, the
US will lack fiscal space to respond.”
What Next for the US Stock Market?
https://www.project-syndicate.org/commentary/us-stock-market-set-to-fall-by-martin-feldstein-2018-08