Government Debt and Inflation: Reality Intrudes

by Gerald P. Dwyer
The American Institute for Economic Research

The last couple of years have witnessed extraordinary spending by the federal government. It has been quite the party. Figure 1 shows government spending since 2000.

[…] The increase to 30 percent of Gross Domestic Product (GDP) in 2020 stands out. Government revenue, also shown in Figure 1, does not jump. Federal government revenue in 2020 and 2021 is not particularly higher or lower than earlier years. The increase in spending was financed by dramatic increases in debt. Public debt issued by the federal government increased from 107.4 percent of GDP at the end of fiscal year 2019 to 127.6 percent two years later. As Figure 2 shows, the increase and the level are quite extraordinary.

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