Economist Scott Colbert describes ways to lower deficit, improve economy

The economy is always in flux, and Scott Colbert, chief economist and executive vice president of Commerce Bank, visited Cape Girardeau to discuss it.

“The Achilles’ heel that the economy has is the massive deficit that we’ve built up and, of course, it’s very hard to address that,” the economist told the Southeast Missourian on Friday, Feb. 28.

The federal government spends $7 trillion per year, he said, but only takes in $5 trillion a year. Those trillions in deficit add up year after year and the nation’s debt currently stands at some $36 trillion.

The chief way to lower the deficit is for the government to spend less, Colbert said. With a $30 trillion economy and nominal gross domestic product growth of around 4%, or $1.2 trillion, spending less than that $1.2 trillion every year would make progress in erasing the deficit.

Spending is out of control because the government has agreed to do too much, Colbert said, and it does not have the means to pay for it.

“As anybody who has ever taken an economic course knows, we have unlimited wants and limited means,” he said.

Tax revenues as a percent of the GDP averaged around 17% over the last decade and have never eclipsed 20%. Colbert said a balanced budget would necessitate 23.5% of the GDP to come from tax collections.

“The combination of these tax cuts that (President Donald) Trump is providing versus the revenue enhancers from tariffs isn’t likely to change this equation much, thus the focus on spending and the so-called DOGE committee, the Department of Government Efficiency.”

Colbert said he was a conservative economist, but the outcomes of economic decisions made by the Trump administration remain foggy. He said if Trump’s tariffs against nations such as Canada, China and Mexico can lower the deficit, the United States could emerge with a stronger economy.

Tariffs are what Colbert has been asked about the most recently. He said they won’t eliminate the deficit entirely, but they are aimed at bringing jobs to the country, raising some revenue and furthering American interests.

“We can’t be dependent upon ‘frenemies’ and, basically, when I say that, I mean China, for goods and services that they could take away at key and critical times when we need them,” the economist said.

Colbert said federal spending should be used to grow the economy, improve infrastructure and create jobs. Instead, it’s often used as a transfer payment to the likes of Medicare, Medicaid and Social Security.

“We probably still have some room, and some time, but the incremental borrowing that we’re doing has no multiplier,” he said.

U.S. Secretary of the Treasury Scott Bessent had expressed a goal of getting the debt-to-GDP ratio down to just 3%; it is currently 6.4%.

The economy is growing faster than Colbert predicted, and banks, businesses and consumers are not overspending — only the government is. The GDP recovered quickly from the coronavirus pandemic at the start of the decade, taking 13 months to recover versus three years during the 2008 subprime recession. This is despite total debt being much worse than in the recession. Colbert attributed the recovery to the massive amounts of stimulus money sent out.

“I like to tell people we haven’t even approached a landing yet. We’re just cooling from all this fast growth,” he said.

Commerce Bank is headquartered in Kansas City and operates more than 200 locations across five states.