The US economy faces an 'everything problem' – and the Fed has only bad options, researcher says
in a recent interview. The head of Forest for the Trees, a financial-research firm, said the core issue lies with the government's debt and deficit spending.
The federal government has about $31.5 trillion of debt, exceeding the US economy's fourth-quarter GDP of $26 trillion,. Servicing the debt costs about $400 billion a year, or nearly 7% of the government's annual budget. The federal deficit also grew by nearly $250 billion to $723 billion this fiscal year.
If the Fed keeps hiking rates to crush inflation, it risks causing a recession that results in lower tax revenues, banks selling Treasuries to offset more loan defaults, and the government spending aggressively to shore up the economy, he said. That would exacerbate America's debt and deficit issues, he noted.
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