by William B. Conerly
National Center for Policy Analysis
July 16, 2010
Many people are worried about the United States’ federal budget deficit and accumulating debt burden. In 2009 the federal budget deficit reached a record $1.4 trillion, and public debt (U.S. Treasury securities held by institutions and individuals outside the federal government) is currently more than $8 trillion and growing. The level of discourse is usually simple: “We’re going bankrupt!” But what is the specific threat that the federal government’s huge debt burden poses? Of the three potential effects of the budget deficit and growing public debt – inflation, a debt crisis, or tax hikes – higher taxes leading to slower growth is the most likely consequence.