New York City (ANTARA) – The U.S. government’s budget deficit is causing income problems for U.S. citizens which may then reduce wage growth, USA Today reported Thursday (6/27).
“The increased debt could lead to a 10 percent decline in wage income over 30 years,” said Kent Smetters, a professor at the Wharton School of the University of Pennsylvania and faculty director of the Penn Wharton Budget Model.
Based on an average household income of about US$75,000 (US$1 = Rp. 16,421), the decline equates to a reduction of US$7,500 in current dollars for a typical household each year, he added.
To finance increased spending, the government issues debt such as Treasury bills and bonds with higher interest rates to attract investors. When investors pour money into government debt, they do so at the expense of more productive private investments, in what economists call a “crowding-out” effect, according to the report.
The U.S. Congressional Budget Office (CBO) estimates that for every dollar added to the deficit, private investment will lose 33 cents, reducing economic growth and wages over time.
Last week, the CBO increased its estimate of the fiscal deficit this year by 27 percent, or $408 billion, from its February estimate of $1.9 trillion. The estimated increase in the national debt is due in part to student loan relief measures, higher Medicare costs, and aid to Ukraine, the CBO said.
Additionally, the CBO projects the deficit will rise to $22.1 trillion over the next decade, the report says, or $2.1 trillion more than its last estimate.
Journalist: Xinhua
Publisher: Santoso
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