Feb 10, 2018 - Politics & Policy

Big federal deficits could limit future U.S. policy

Donald Trump.

Photo: Mike Theiler, Pool / Getty Images

"The last seven weeks amount to a sea change in United States economic policy. The era of fiscal austerity is over, and the era of big deficits is back," the N.Y. Times' Neil Irwin writes.

Why it matters: In the long run, "The bigger costs of a high national debt may come in how much flexibility policymakers have to respond to a future recession or crisis. If the United States finds itself in a major war or a deep recession, its starting point in terms of debt load will be much higher than it was at the onset of the Iraq War or the 2008 financial crisis."

What to expect for now:

  • "In the short run, expect some of the strongest economic growth the country has experienced in years."
  • "In the medium run, there is now more risk of surging inflation and higher interest rates."
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