Swagel, who served in the US Treasury under Republican president George W Bush, acknowledged that next year would be important “for fiscal policy in particular”, given debate over extending the tax cuts and Obama-era healthcare subsidies that are also due to expire.
The CBO projections issued this week showed debt-to-GDP levels surpassing their second world war high of 116 per cent in 2029 — a trajectory that Swagel described as “unprecedented”.
“The debt that was run up during World War Two, was largely paid back within the generation of the people who fought the war,” Swagel said.
“The fiscal burdens being generated today are not ones the current generation is going to bear the burden of.” The dollar’s role as the world’s reserve currency would not always insulate the US from market pressures as debt interest payments increased, Swagel warned.
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