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Future deficits top fiscal issue, economists say

– The biggest fiscal challenge facing the U.S. is the size of projected deficits in the 2020s and 2030s, according to a survey of business economists.

The National Association for Business Economics’ survey of 220 members in July and August found that members were more concerned about the size of deficits in the next two decades (43 percent) than they were about current deficits or deficits over the next 10 years (37 percent).

The policy survey found no consensus on the best way to address those deficits.

The group said 39 percent of those surveyed felt the best way to address the deficit-to-gross-domestic-product ratio in the next few decades is a mix of spending restraint and increased revenue. It said 32 percent believe the best single tool would be greater spending restraint, and 20 percent said enacting policies designed to encourage economic growth would be the best tactic.

Ballooning Social Security and Medicare costs as the U.S. population ages are expected to yield growing long-term budget deficits.

The group said there is broader agreement about monetary policy; a majority of panelists think the Federal Reserve’s current policy is “about right.” But the respondents diverged on when they think the Fed will stop its policy of buying bonds to prop up the economy.

The Fed’s bond buying has helped keep U.S. interest rates near record lows. But speculation about when the Fed will slow or stop the program has fed volatility in the financial markets.

About 39 percent of survey respondents think the Fed will begin slowing the program in the fourth quarter of this year. About 7 percent think it won’t happen until 2015 or later.

Also, about 39 percent think the Fed will wait until 2015 or later to begin raising its interest rate targets, its traditional tool for balancing economic growth while keeping inflation in check.