A perfect economic storm might be coming our way

As the White House continues to take up all our attention with its ongoing tariff war against the world, a little ways down Pennsylvania Avenue, Congress is preparing a budget bill that could prove to be almost as consequential. If lawmakers renew President Donald Trump’s 2017 tax cuts, enact all his newly proposed ones and do not cut spending, they will add up to $9 trillion to the national debt over 10 years (according to the nonpartisan Peter G. Peterson Foundation.) At that point, America would likely be running among its largest deficits as a percentage of gross domestic product in history — and that’s in peacetime with no pandemic. At the same time, Washington is raising tariffs on almost all the country’s imports. We might have the makings of a perfect storm in the global economy.

That’s what Kenneth Rogoff, a renowned Harvard University economist, worries about. One of his past books presciently warned about the dangers of a financial crisis. (It was published in 2009 while the global financial crisis was unfolding but was researched and written well before it began.) His new book, “Our Dollar, Your Problem,” worries that we are jeopardizing the dollar’s pivotal role in the global economy. That should matter to all Americans because we benefit enormously from what has been described as the “exorbitant privilege” of having the world’s reserve currency. “It allows us to borrow more cheaply whether it’s mortgages, car loans, or credit card debt,” Rogoff explained to me, estimating that the discount Americans get on their loans because of the dollar is probably between 0.5 and 1 percent.

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