There is a new round of hysteria about supposedly rising deficits and debt, giving leverage to House Speaker Kevin McCarthy's strategy of holding the debt ceiling hostage for deep program cuts. The latest report of the Congressional Budget Office, released February 15, showed the federal debt relative to GDP increasing from 98 percent this fiscal year to 118 percent by 2033—though on the other hand, the deficit has fallen drastically over the last two years.

That debt-to-GDP ratio should not be alarming per se. It was higher at the end of World War II, on the eve of three decades of sustained prosperity.

But the CBO's numbers produced ammo for the fiscal right and the Democratic deficit hawks, as well as hand-wringing in the mainstream press, all of which increases pressure on Biden to agree to some budget cuts.

CBO also acknowledged that public spending was lower in 2022 than in the two pandemic years of 2020 and 2021. Besides spending, the other factor in deficits is revenues. A prime culprit in the rising level of deficits and debt is the Trump tax cuts, whose reduction in revenues account for about 40 percent of increased deficits.

The other main culprit is the Federal Reserve. Tight money policies increase interest costs on the public debt.

In its report a year ago, the Congressional Budget Office projected that net interest payments would cost the Treasury $8.1 trillion over the next decade. In its latest report, CBO raises that to $11.1 trillion. Most of that is the result of higher interest rates. If the Fed would just take its foot off the economy's oxygen hose, those projected costs would recede.

It's the same story with economic growth. Under Biden, the economy created a record ten million jobs in two years. The public debt becomes far less of a problem relative to GDP if the economy keeps expanding rapidly and avoids a recession. This prospect can also be made worse or better by Fed policy.

The larger point here is that austerity never works to reduce the all-important ratio of debt-to-GDP. The far sounder approach is to keep the expansion and job creation going.

Biden's public investments are responsible for a stunning recovery. It would be perverse economics and dumb politics to undermine that success for the sake of debt reduction.