Debts & Deficits: A Slow Motion Train Wreck

Importantly, surges in budget deficits as a percentage of GDP, are normally associated with “recessionary” activity in the economy. As noted, the increases in Federal spending create a temporary boost to economic growth which supports higher asset prices. Currently, the government is running one of the largest deficits, in both dollar terms, and as a percentage of GDP, in history. This is occurring at a time when the economy is “booming” and deficits should be reduced for the next “rainy day.”