When Congress comes back in September to work on the budget, they will have to address not one, but two deficits. That’s because America suffers not just from a yawning fiscal deficit but also from a terrible backlog of needed investments, including for research and development, education, and infrastructure. It, too, is a deficit that threatens America’s long-term prosperity. In fact, these twin deficits often reinforce each other in confounding ways. Cutting spending can ease the near-term fiscal deficit while depressing long-term growth and raising our debt in proportion to our income. Yet borrowing money merely to increase regular spending is likely to worsen the fiscal deficit without doing much for the nation’s long-term growth.
