The government’s spending surge to ease the financial crisis and a worsening recession is increasing the federal share of the nation’s economic activity close to $1 out of every $4, the highest level since World War II, an analysis of current and projected payments shows….
Economists warn that the fast pace of government spending could spell trouble in the future: slower economic growth, higher interest rates, and the likelihood that tax increases or spending cuts will be needed to tame a budget deficit headed toward a record $1 trillion. The government reported Wednesday that the deficit for the first two months of the 2009 fiscal year was more than $400 billion.
“That’s the opposite of what we’re trying to do to the economy,” says Maya MacGuineas, president of the non-partisan Committee for a Responsible Federal Budget. The government should boost spending, but “we have to do it really carefully,” she says.