Whoever wins, the new president will eventually face fiscal realities that force him or her to develop strategies for decreasing the national debt as a share of the economy over the long term.

Our current debt may be manageable at a time of unprecedentedly low interest rates. But if we let our debt grow, and interest rates normalize, the interest burden alone would choke our budget and squeeze out other essential spending. There would be no room for the infrastructure programs and the defense rebuilding that today have wide support.

It’s not just federal spending that would be squeezed. The projected rise in federal deficits would compete for funds in our capital markets and far outrun the private sector’s capacity to save, to finance industry and home purchases, and to invest abroad.

Instead, we’d be dependent on foreign investors’ acquiring most of our debt — making the government dependent on the “kindness of strangers” who may not be so kind as the I.O.U.s mount up.

We can’t let that happen — not if we want an America that is able to provide growth and stability at home while maintaining global leadership. We would risk returning with a vengeance to stagflation — the ugly combination of inflation and economic stagnation that we tasted in the 1970s.

Eoin Treacy's view

This is a cautionary tale from two highly experienced, credible students of the market. What they propose is simple and, if adopted now, would remove many of the issues fiscally minded citizens and investors worry about. However since it most often takes a crisis to force real change we can be almost assured that whoever wins the US presidential election the national debt will expand in order to fund a fiscal spending plan focused on infrastructure.

The Fed has already said that it will be more inclined to raise rates if the next president introduces a fiscal bump. That might force the hand of the next administration to at least begin thinking seriously about reform of the taxation and benefits system.

Here is a short section from a Bloomberg article:

“If we have more expansionary fiscal policy, we don’t need as expansionary a monetary policy,” Federal Reserve Bank of Boston President Eric Rosengren said in an Oct. 15 interview.

That sort of hand-off from monetary to fiscal policy could prove troublesome for financial markets that “have been both sedated and seduced by the prospect of low rates for longer,” said Joachim Fels, global economic adviser at Pacific Investment Management Co.

Caterpillar is already benefitting from the revival of interest in basic resources but would benefit additionally if physical infrastructure spending increases. The share has held a progression of higher reaction lows since January and a sustained move below the trend mean would be required to question potential for additional higher to lateral ranging.

Elsewhere Flour has been ranging above a Type-2 bottom in a process of right-hand extension since March. It needs a sustained move above $55 to reconfirm medium-term demand dominance.