Deficit: Biggest Share of Economy Since 1945
February 15th, 2011Via: AP:
Not since World War II has the federal budget deficit made up such a big chunk of the U.S. economy. And within two or three years, economists fear the result could be sharply higher interest rates that would slow economic growth.
The budget plan President Barack Obama sent Congress on Monday foresees a record deficit of $1.65 trillion this year. That would be just under 11 percent of the $14 trillion economy — the largest proportion since 1945, when wartime spending swelled the deficit to 21.5 percent of U.S. gross domestic product.
The danger is that a persistently large gap in the budget could threaten the economy. Investors would see lending their money to the U.S. as riskier. So they’d demand higher returns to do it. Or they’d simply put their cash elsewhere. Interest rates on mortgages and other debt would rise as a result.
