Deficit

Daily Local News (West Chester, PA) - - MARKETPLACE -

tially, is, ‘Here are the new things that I want to do,’” said Dou­glas Holtz-Eakin, a GOP econ­o­mist and pres­i­dent of the Amer­i­can Ac­tion Fo­rum think tank. “What that’s re­ally say­ing is: ‘I have no play to fix the ex­ist­ing prob­lem. None.’ So they have

no plan.”

If Clin­ton wins, many Wash­ing­ton ob­servers be­lieve the chron­i­cally grid­locked cap­i­tal city will re­main un­able to act on ma­jor is­sues such as the deficit, taxes or weak­nesses in Obama’s 2010 health care law.

“We just have big philo­soph­i­cal dif­fer­ences,” Ryan told a home-state group of col­lege Repub­li­cans on Fri­day, adding

that a Clin­ton vic­tory would mean “hav­ing more of the same stale­mate.”

The deficit is­sue has largely fallen in promi­nence in Wash­ing­ton in re­cent years, due in large part to its fall from record highs and a sense of res­ig­na­tion that Obama and con­gres­sional Repub­li­cans sim­ply can’t agree on ways to cut it af­ter some failed at­tempts in re­cent years. Most econ­o­mists

don’t be­lieve the deficit is very wor­ri­some in the short term.

“It’s to­tally man­age­able. There’s lit­er­ally noth­ing there to worry about,” said left-lean­ing econ­o­mist Dean Baker of the Cen­ter for Eco­nomic and Pol­icy Re­search. “What’s the in­ter­est rate on 10year bonds or the 30-year bond? If ac­tors in the fi­nan­cial mar­kets thought there was any plau­si­ble

prob­a­bil­ity of this sort of fis­cal cri­sis ... we’d be look­ing at 10-year rates of maybe 5, 6, 7 (per­cent).”

But the pic­ture over the long run is more prob­lem­atic, at least un­der a con­ven­tional view that if deficits con­tinue to rise the na­tional debt grows, gov­ern­ment bor­row­ing would “crowd out” pri­vate lend­ing and force up in­ter­est rates. And if in­ter­est rates go up, the gov­ern­ment

would have to pay much more to fi­nance the more than $14 tril­lion in Trea­sury debt held by in­vestors.

“We’re go­ing into a debt spi­ral and, de­pend­ing how far down you get in that spi­ral you have a sov­er­eign debt cri­sis,” said Holtz-Eakin, a for­mer GOP-ap­pointed CBO di­rec­tor. “That’s just run­ning a big risk for the bud­get and the econ­omy.”

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