By Kevin McNabola
Orange Board of Finance
Kevin McNabola
As we pass the end of the second quarter, average Americans still seem to be struggling with affordability.
Our overall economy continues to be resilient, with GDP growth projected to be 2.5 percent in 2026, along with strong productivity and innovation gains within AI and technology investments. The labor market continues to be strong, with unemployment around 4 percent.
However, economic headwinds continue, with rising debt levels and the 2026 deficit projected to be $2 billion.
How will the US ever get its fiscal house in order? Even with revenue growth, the country continues to see structural deficits year after year. Successive presidential administrations and Congress over the past two decades have failed to take the necessary countermeasures. That includes four members of Connecticut’s congressional delegation, who have failed to agree on measures to reverse the trend of our annual fiscal deficits, growing interest costs and $39.3 trillion national debt.
When spending exceeds revenue, creating a budget deficit, the federal government has to cover the gap by selling securities, such as Treasury bonds. The national debt is the accumulation of all past deficits and the interest owed on the resulting debt.
Measuring the debt as a share of gross domestic product allows for comparing the level of debt over time relative to the size of the US economy versus other countries’ debt-to-GDP ratios.
Is default likely? Between 2011 and 2025, Congress delayed raising the debt limit 13 out of 15 years, forcing Treasury to rely on extraordinary measures. Ultimately Congress passed the debt ceiling limit on last day possible. This type of brinkmanship was a major reason why the nation’s credit was downgraded in 2011 and again in 2023.
Our congressional representatives should be working on common sense solutions before we face another credit downgrade, which historically has been driven by the long-term deterioration of government debt.
So what steps can Congress take to put the US on a sustainable path? Here is my 10-point proposal:
– Bipartisan fiscal reform with sound fiscal and macroeconomic policy that will reverse our current debt trajectory.
– Develop a bipartisan plan to increase revenues: optimizing tax policy and a selective tariff policy.
– Develop a bipartisan plan for significant multi-year reductions in mandatory spending and slow the growth in spending within health care and pensions.
– Continue to strengthen the US dollar and build liquidity into the market.
– Create bipartisan legislative solutions to stabilize and decrease deficit spending.
– Invest in long-run growth drivers with targeted investment in infrastructure, energy and digital connectivity.
– Support research and development innovation (including AI) while ensuring that policy prevents monopoly power.
– Let the Federal Reserve keep focusing on its dual mandate – price stability and maximum employment – without political interference.
– Align fiscal policy with monetary policy: avoid large, pro‑cyclical stimulus when the economy is already strong and inflation risks are elevated.
– Recalibrate trade policy and shift tariffs from the current across-the-board approach to a more targeted approach so as to minimize consumer price impacts.
Both the current president and Congress owe it to the American people to prioritize fiscal reforms over the coming months to reverse the course of future deficits and entitlement spending. We expect and elect people to work together and develop consensus on solutions that matter. We need our elected officials in both parties to end the political polarization and rhetoric and pivot to work on real fiscal solutions.
We need not look back that long ago to a time and place in Washington when bipartisan solutions were the norm. The successful passage of the Balanced Budget Act of 1997 is a prime example, when President Bill Clinton and House Speaker Newt Gingrich worked together and delivered a sustainable fiscal plan and a balanced the budget – the last we’ve seen since 1998.
Kevin McNabola is the chief financial officer for the city of Meriden and a member of the Orange Board of Finance.