That nagging math problem

Dwarfed by other news yesterday, the Congressional Budget Office (CBO) updated their budget projections reflecting the new tax law and spending plan. Over the next ten years, the just over $21 trillion debt is expected to increase by $11.7 trillion bringing it to about $33 trillion. Before these two changes, it was expected to increase to about $31 trillion.

The CBO also said the deficit should rise to $804 billion by 2018 fiscal year end. Last year it was $665 billion. Further, the annual deficit should pass $1 trillion by 2020 and stay there.

There are many in Congress today who have screamed bloody murder in the past over rising debt and got elected under the banner of the Tea Party. I have seen footage of members who called this a crisis when it was only $8 trillion and then $13 trillion. They were right then, but now debt and deficit don’t seem to matter as many voted for a law to increase it.

I have seen some recent discussion about the need for a balanced budget amendment. To be frank, that won’t do. We need more revenue than expenses. The tax law passed in December is projected to increase the debt by $1.5 trillion, but Congress knew that then and still passed it, even many of these Tea Partiers.

I said this before, but I believe the tax law passing is extremely poor stewardship, even malfeasance. We are borrowing from our future to try to make an economy, that was in a 103 consecutive month growth period with seven consecutive years of 2 million plus job growth, even better.

To be frank, we cannot cut our way out of this problem. The math will not work. We must also have more revenue than we had before the tax cut. At some point, a future Congress and President will get all the flak for abruptly addressing this problem. Yet, they will be the better stewards, far better than the current President, Congress and their predecessors have been.

Bill Clinton takes a lot of heat for his womanizing, rightfully so, but he handed a surplus budget and smaller debt to George W. Bush. Bush went against the advice of his Treasury Secretary and passed a tax cut and then we invaded two countries draining our budget. And, my biggest criticism of Barack Obama is he shelved the Simpson-Bowles Deficit Reduction Committee report failing to use it as very good starting point for change.

Folks, like climate change, this math problem is not going away. We must address our debt now or it will be much more severe later. And, if people think it does not matter, that country we are imposing tariffs on owns a lot of our treasury bonds, bills and notes. They have floated the idea of stop buying them even before the tariff war. That also makes it a security risk as well.

17 thoughts on “That nagging math problem

  1. Note to Readers: This debt and deficit problem is akin to someone making $50,000 having expenses of $65,000 while having mortgage and credit card debt of $325,000. It will be even worse in 2027.

  2. Maybe some folk within the presidential court have assumed since these numbers are beyond comprehension, and as the USA is ‘ too big to fail’ then it doesn’t matter. Thus they can just go on as they are.
    There is a troubling analogy of the evolution from star to supernova; as the star is no longer able to sustain its own core and the result is a massive explosion prior to a collapse.

    • Roger, your supernova example is a good one. If countries like China by fewer or no US treasuries, that could pose a funding problem. The other is the inability and stubbornness to fix things. We are letting our infrastructure demise and it costs a lot more on the back end after a natural or man-made disaster to fix than if we do it before. This is how the death spiral occurs, very slowly at first. Keith

      • Agreed Keith. Any state irrespective of its political inclinations cannot afford to ignore infrastructure demands, particularly one which has several time zones

      • Roger, true. I remember opponents of Obama celebrating that Chicago did not win a bidding for the Olympics that the President had aided. Lost in the announcement was a key reason – America’s infrastructure, especially airports, grids and transit, were in need of updating. Keith

  3. First of all, those in Congress who voted to pass the tax cuts to benefit the already-wealthy are hypocrites, for as you said, many are the same ones who were screaming bloody murder not so long ago about a much smaller deficit/debt.

    I think the average citizen shrugs their shoulders at this, thinking it doesn’t have a direct impact on them. But … it does! I look for our S&P rating to drop before long, and then the cost of borrowing will increase. Thinking about buying or building a new home? Guess what. Add that to the CPI increases that are an absolute certainty in light of the tariffs being imposed on both sides of the ‘trade war’, and the extra $10 or so that the average worker sees on his paycheck is more than eaten up by inflation. And most importantly, though many choose to view only today and let the future take care of itself, is that this cannot continue forever. Sooner or later, we will not be able to borrow the money to meet our expenses. It’s very simple math, but … a lot seem to have failed Math 101.

    • Jill, this math does hit home and will hit home even more whether people realize it or not. We should not forget some Congress members balking at Hurricane Sandy relief and similar relief to Puerto Rico, Florida and Texas. We should not lose sight of defunding research into vaccines and medicines especially with pandemic viruses and antibiotics. And, then we have preventing infrastructure failures – the next train wreck, the next bride collapse, etc. These lessons cannot be lost on people, otherwise we are causing our own death spiral. Keith

      • I think it is a matter of too many being caught up in a feeding frenzy. When reality strikes … and it will … they will feel as if they have had an anvil dropped on their heads. The numbers don’t lie … one can play with them and turn them every which way, but at the end of the day, 1+1 still =2.

      • Jill, what this came down to is money, the campaign financing kind. Big donors told Republican leaders if you don’t pass a tax bill, do not expect any future donations. That was the primary reason for the urgency. So, these so-called leaders made deeper cuts than needed and added to the deficit. They could have kept it deficit neutral or dilutive, but chose not to. Also, the debt would be measured as even worse, as the models presume some of the tax law cuts will sunset in ten years. Keith

  4. Dear Keith,

    Most of us get it. The tax cuts bill in 2017 was definitely malfeasance. The businesses would have been ecstatic with a lowering of the corporate tax rates to 25%. Most of all the other loopholes could have then been done away with and the wealthy could have paid a bit more to pay for the corporate tax rates cut and to allow for some revenues before the GOP started spending like drunk sailors.

    The GOP were greedy to where they didn’t care about the negative consequences.

    Hugs, Gronda

    • Gronda, I want to disagree with you in part. Many do get this, but I do not believe it is a majority. Either that or the numbers are too large to comprehend. That is why the example in my note was added to my email I sent out.

      I agree the GOP has been hugely hypocritical, but the Dems need to step up as well. For example, Berbie Sanders spoke of increasing taxes for national healthcare, but overlooked that we need to increase taxes to pay down the debt as well as cut spending. But, clearly on the tax bill, the GOP were malfeasant. Keith

  5. Up here in Canada, the Conservative Party calls the Liberal Party “those tax & spend Liberals.” Every election they rail about Liberal mismanagement of the economy. In 1984, after the departure of Pierre Trudeau (L) after 16 years as PM, they crucified the new Liberal Leader, about the Humongous Trudeau debt. Mulroney’s Conservatives won and ruled for the next 9 years. They more than doubled the Trudeau debt. That is one example of many. Conservative parties do not walk their fiscal talk – never have and never will. So this post is no surprise to me, Keith.

    • John, that is interesting. Here in the states, I like to use an unusual similarity between two effective presidents on these issues per an economic advisor to both. David Smick notes that Democrat President Bill Clinton and Republican President Ronald Reagan are the number 1 and 3 job creators. They loved global trade and hated deficits. Our current President wants to limit global trade and obviously does not care about reducing deficits. I would love more detailed study and notoriety for Reagan and Clinton’s similarities.

      Thanks for sharing the Canadian history. Keith

  6. Note to Readers: Between this and ignoring climate change, our younger citizens need to lean harder on candidates about lack of positive action. They will be left with this problems and should be perturbed by the poor stewardship of elected officials.

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