Did you know that “the federal debt is expected to grow from 124 percent of gross domestic product (GDP) in 2025 to 135 percent in 2035”? Yes or no, from this fact you probably can guess what the consequence of this sad fact of rising government debt is: “the federal government will absorb an increasingly larger share of the economy and capital markets.”
The quotations are from an article in Reason magazine by Mariana Trujillo, “The National Debt Is Becoming Your Local Problem.” It is well worth reading, for this discussion of an ever-growing problem is distinct from most others, in that it focuses on the effects of said problem on the governments closest to you.
The $29 trillion federal debt held by the public is becoming an increasingly local problem. Washington’s fiscal challenges have led to increased borrowing costs as well as reduced federal aid to states, cities, and other local governments — who may soon have to reconsider their budgets as they face a difficult choice: cut services, raise taxes, dip into reserves, or incur further debt.
Curiously for a “libertarian” magazine, the general tenor of the challenge local governments now face — increasingly — is not depicted as an opportunity. Less government, libertarians are wont to say, is better. Being forced to economize should be a welcomed thing. Look on the bright side.
Well, OK — Ms. Trujillo does conclude with a hint of that perspective:
As federal support dries up from many ends, and its return becomes not only politically but economically less feasible, state and local governments should resist the temptation to push costs to an indefinite future and drive down precious savings to fund permanent programs — precisely the approach that has led to the status quo — and opt instead for a serious, responsible reorganization of their finances.
It just doesn’t seem very upbeat. None of that old-fashioned, Robert Poole-style “Cutting Back City Hall” enthusiasm.
Still, the article is well worth reading. Though not long, it contains some interesting facts.