The US added trillions in stimulus spending, making the economy experience a “mini growth miracle.” The growth could become a burden in the coming years as federal spending and debt are added to the economy. The Rockefeller International chair, Ruchir Sharma, highlighted how the world thanked China for leading economic growth after the 2008 financial crisis. 15 years later today, the Chinese economy is in turmoil because of massive stimulus campaigns during the global financial crisis.
Debt weighed down the Chinese economy, and the US is now following the same downward path that China walked previously. Sharma wrote in the Financial Times that post-mini miracle growth, the US could face similar headwinds to China.
Federal Spending, Debt, Reasons for US Economy To Slow Down
The Federal spending reached $8 trillion in 2021 with $6 trillion spent on the US military. The other $2 trillion went to entitlement programs, government subsidies, and financial aid to companies to compete against China.
The analyst called the current positive US economy a temporary phase and the make-up could wear off soon. He warned that the US economy could settle into a long and slow grind mirroring the Chinese economy.
“Many nations have come to regret massive stimulus campaigns, as the resulting debts weighed on growth. Big spender China was credited with ‘saving the world’ after 2008, but it has seen growth slow since then,” Sharma said. “Post-miracle, the US will face similar headwinds. When the stimulus and other temporary boosts wear off, the American economy could settle into a long, slow grind.”
In conclusion, Federal spending and uncontrolled debt could be the top reasons for the US economy to slow down. The US debt hit an all-time high of $33 trillion this month and the economy added $10 trillion in debt in three years.