The Monster Deficit> In 1984, the Federal Deficit was at $183.7 billion. “Government deficits of such unprecedented magnitude threaten to boost interest rates, reignite inflation, discourage capital investment and hinder growth. At worst, the budget imbalance could stop the recovery cold. Warns Volcker: ‘If left unattended, the deficits will accumulate until they undercut all that has been achieved with so much effort and so much pain.’”
With this year’s deficit hitting $455 billion, it’s worth noting that despite the dire predictions related to the 1984 deficit, the S&P 500 more than doubled over the next 10 years, going up 218%.
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