Ken Griffin’s Deficit Warning
Plus, a challenger for Elizabeth Warren, good news from Israel, the rideshare boom
Citadel founder Ken Griffin is warning about federal debt as a “growing concern that cannot be overlooked.”
Bloomberg reports:
Griffin said net interest spending is estimated to reach 3.1% of gross domestic product for 2023, citing Congressional Budget Office estimates.
That’s a percentage point more than the average from 1974 to 2023, the letter said.
“It is irresponsible for the US government to incur a deficit of 6.4% when unemployment is hovering around 3.75%,” Griffin said in the letter. “We must stop borrowing at the expense of future generations.”
Here is a figure from the Congressional Budget Office showing how interest on the debt is projected to soar as a share of GDP.
That is based on the assumption that the Fed cuts interest rates soon. The longer the Fed doesn’t cut, the higher the interest payments stay for longer, and the uglier the federal budget picture looks going into the November election and afterward. Presumably Jerome Powell understands this, which may be one more reason a lot of people expect him to cut.
Not that interest rates are the dominant deficit factor. The way Washington works, the politicians will take any unexpected additional decrease in interest costs and find a way to turn it into not narrower deficits, but additional spending. That will fuel inflation, which could drive interest rates up all over again. A virtuous cycle, it isn’t.
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