That makes two. In last month's newsletter I highlighted the change of heart by Obama administration budget director Peter Orzag. Recently, former Biden administration chief economist Jared Bernstein made a similar public confession in The New York Times that he was "joining the hawks."
According to Mr. Bernstein, "if we continue to ignore the unforgiving trajectory we are on, we are inviting a debt shock, a kind of crisis that periodically hobbles lower-income and developing countries." Orzag and Bernstein are joining the ranks of respected economists such as Lawrence Summers and Jason Furman, who have long warned of the dangers posed by budget deficits and inflation. Better late than never.
The former Chair of the Council of Economic Advisers compares America's public debt to student loans. Those students whose incomes rise faster than their debts are fine, "conversely, though, if they borrowed to the hilt--and if their student loan debt starts growing faster than their income--they can quickly get in trouble. And that's where our country is right now." Below is a graph of federal net outlays as a percentage of Gross Domestic Product (GDP).
On January 1, 2000, federal net outlays were 17.45% of GDP. By 2024 that percentage had grown to 23.13% and a big portion of that is nothing more than interest on previous debt. We are now spending 5.68% per year more as a percentage of what we produce than we did in 2000. I am sorry that I do not have a 2025 number available, but it hasn't gotten better.
Mr. Bernstein's point is a good one. We cannot increase spending at a higher rate than our economic growth allows. This is why I have some hope. Those who argued for what some of us called "fiscal responsibility" were dismissed as budget hawks. I don't think that Mr. Bernstein is suddenly a hawk. Instead, we may be seeing a paradigm shift among economists, or what policy wonks like to call a shift in the Overton window, away from unrelenting deficit spending. That has to be a good thing if we are ever to have consensus and a sustainable economy.
* Bernstein, J. "Biden's Chief Economist: The Chart That Convinced Me Our Debt Is a Serious Problem". The New York Times, Online, July 09, 2025.https://www.nytimes.com/2025/07/09/opinion/debt-deficit-economy-shock.html. Accessed on 07.17.2025.
** U.S. Office of Management and Budget and Federal Reserve Bank of St. Louis, Federal Net Outlays as Percent of Gross Domestic Product [FYONGDA188S], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/FYONGDA188S, July 15, 2025.