From Fortune · Eleanor Pringle · · 1m 40s
Fixing national debt could raise household income by $36,000
A new study argues that tackling America's $40 trillion debt pile would boost real incomes and ease an affordability crisis that voters rank as a top concern.
In brief
A new study argues that tackling America's $40 trillion debt pile would boost real incomes and ease an affordability crisis that voters rank as a top concern. The Committee for a Responsible Federal Budget says deficit reduction would lower inflation and interest rates, potentially adding thirty six thousand dollars…
Affordability tops voter concerns
A July Pew Research study found 29% of voters wanted Congressional candidates to address price increases, with another 15% citing affordability and cost of living as key issues.
CRFB: deficit reduction cuts inflation
The Committee for a Responsible Federal Budget argues that reducing the deficit would help the Federal Reserve fight inflation, currently at 3.4% against its 2% target.
“When interest rates remain well above the zero lower bound and the economy is performing near its productive capacity, deficit reduction can reduce excess demand and slow price growth.”
Lower rates mean real savings
The committee calculated that a 1.5 percentage point rate reduction would save a family $5,800 per year on a $500,000 mortgage and $500 per year on a $50,000 car loan.
Stable debt boosts long-term income
The Congressional Budget Office estimates that stabilizing the U.S. debt-to-GDP ratio at approximately 123% would boost real per-person income growth by 10% over three decades.
The thirty six thousand dollar gap
Using CBO modeling, the CRFB found that with stable debt, income per person would grow by $46,500 over three decades versus $32,350 with rapidly rising debt, a difference of $14,250 annually.
“To put these numbers in context, income per person would grow by $46,500 over the next three decades, in today's dollars, with a stable debt, as opposed to $32,350 with rapidly rising debt.”
Growth advocates push alternative path
Treasury Secretary Scott Bessent argues the U.S. can grow its way out of debt imbalance, saying there is nothing magic about the $40 trillion number, as the Treasury spends $3 billion daily on interest.
“There's nothing magic about the $40 trillion number. And we can grow our way out of that.”
The takeaway
The Committee for a Responsible Federal Budget says deficit reduction would lower inflation and interest rates, potentially adding thirty six thousand dollars to average household income over three decades.
