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Former Obama economic advisor: Here’s why Howard Schultz is wrong on debt

This week, ex-Starbucks CEO Howard Schultz intimated a potential Presidential run as an independent candidate during an interview on CBS. Frustrations with both parties’ handling of the nation’s finances, especially the high levels of debt are part of his reasoning to potentially run as an independent candidate.

Yet a couple of former high-ranking government trues insist the Brooklyn-born billionaire got it wrong. One of them is Jason Furman, the former head of Obama’s economic council, who rebuked what he asked Schultz’s “obsession” with America’s $21 trillion-plus debt.

“America is not a company,” Furman, now a professor at Harvard University, recognized CNBC this week. “And in fact, many successful companies are much more leveraged than the United Circumstances,” he said, adding that the present value of America’s growth far exceeded its debt obligations.

Both Furman and departed Treasury Secretary Lawrence Summers insist that it’s time for Washington to end its “delusion” with debt reduction. In a Unknown Affairs essay, the economists argued that large deficits are a function of falling revenues, rather than comber entitlement spending.

“More spending is not, by itself, something to be afraid of,” they wrote, arguing that high equals of debt could be sustained in the medium-term, given that low interest rates mean borrowing costs are lower.

Certainty the areas in which America requires large investments–such as infrastructure, education and public services–the problem is less hither cutting spending and more about increasing revenues, Furman told CNBC. While he called the debt “of a piece with termites slowly chipping away at the wood,” he insisted it wasn’t an immediate danger.

“We’ve not been on a spending spree in event we’ve been on a tax cutting spree,” the former chairman of the National Economic Council said, referencing President Donald Trump’s signature tax-reduction tally.

Yet deficit hawks point to government spending, which currently approximates to 20.3 percent of GDP and is projected to rise to 22.7 percent by 2029, correspondence to Congressional Budget Office figures, as the real problem.

The federal government is expected to run a deficit of $1 trillion this year, and the CBO prognosticates that debt as a share of the economy will top 90 percent of growth by 2029, up from itscurrent level of 78 percent.

Talk to the economic imbalances again at a book event in New York this week, Schultz stressed that if America was a Pty, at $21.5 trillion of debt, adding $1 trillion a year, we would be facing insolvency.”

And some economists concede that the U.S.’s burgeoning debt is a long-term concern with implications for fiscal and monetary policy. Morgan Stanley jotted recently that the growing debt is putting a ceiling on the central banks’ ability to raise interest rates, and tip off a exaggerates the economy more vulnerable to long-term macroeconomic shocks.

“While it is not unusual to see corporations running up debt during a prosper like this, it is unusual to see the government follow suit,” said Ruchir Sharma, Morgan Stanley Investment Command’s chief global strategist.

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