The (nonpartisan) Concord Coalition projects debt to be over 100% of US economy

Followers of my blog know I am a broken record on doing something about the US debt and deficit. Below is a copy of a piece entitled “New CBO Report Projects Much Larger Debt Under Plausible Assumptions” by Joshua Gordon that was forwarded by The Concord Coalition.

“In a follow-up to the new Congressional Budget Office (CBO) baseline projections, the CBO released a report last week analyzing the effect that select policy alternatives would have on budget deficits and federal debt. CBO also produced an ‘alternative scenario’ that combines some of these different policy assumptions to create what we view as a more plausible budget baseline because it better reflects current policy rather than a strict application of current law.

The alternative scenario makes two major changes to the official baseline; one on the spending side and the other on the revenue side.

On spending, the main difference is that in making their baseline the CBO convention is to assume that discretionary spending — the spending on defense and non-defense programs controlled by the annual appropriations process — will increase only to keep pace with inflation when there are no existing spending caps in place (the caps were eliminated in the August budget deal). The alternative scenario assumes higher discretionary spending over the next ten years such that it remains constant as a share of the economy (6.3 percent of GDP) compared to the baseline’s assumption where spending drops to 5.6 percent of GDP by 2029. It’s a plausible assumption given the August budget deal and the fact that discretionary spending has never dropped below 6 percent of GDP.

The revenue difference between the alternative scenario and the baseline is the assumption that a future Congress and President will extend a number of different tax policies that are currently scheduled to expire. For example, the alternative scenario assumes that the major individual income tax provisions of the 2017 Tax Cut and Jobs Act that are currently scheduled to expire after 2025, will be extended. In addition, the alternative assumes further delays in taxes created by the Affordable Care Act that have been extended over-and-over again by Congress. Assuming that this behavior with regard to tax policy continues creates a more plausible revenue scenario.

The differences in assumptions leads to outlays being about $1 trillion higher and revenues $1.7 trillion lower over the 2020-2029 period. As a result, debt would grow from 79 percent of GDP to 104 percent in 2029, surpassing 100 percent of GDP in 2028 for the first time since immediately after World War II (1946). The debt in 2029 would be 8.8 percentage points of GDP higher than in the baseline. Deficits over the 10-year period would average 1 percent of GDP higher than in the baseline (5.7 percent instead of 4.7 percent).

While the numbers are sobering, nothing in the CBO’s report is groundbreaking. Instead, it should serve as a reminder that under current law the budget situation is getting worse and is unsustainable over the long term. And that even assumptions made about current law are likely too optimistic — because policymakers’ current policy preferences will tend to make things worse.”

We are at over $22 trillion in debt with the annual deficit for the fiscal year ending this month to be just beneath $1 trillion on an annual revenue base of about $3.4 trillion. In other words, we will be spending about $4.4 trillion this year.

This problem cannot be solved with just spending cuts nor can it be solved with just tax increases. The math will not work. We must have both. Please ask politicians what they plan to do about this ticking time bomb. If they give poor answers, do not vote for them. We must have a plan and the plan cannot be making the debt worse as has been done with the 2017 tax cut and recent spending bills.

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8 thoughts on “The (nonpartisan) Concord Coalition projects debt to be over 100% of US economy

  1. Keith, me friend… the “debt” or any and all so-called national debts are pure invention, chimeras and a massive Ponzi scheme by banksterist Mafia. Money has no intrinsic value, only natural resources and labour. Whether your debt is 1 trillion or a million trillion, it’s a monopoly game played with skewed dice – it can NEVER be repaid because that is not the point. The point is to use numbers to rob nations of resources and enslave people to give away their labour to worthless scam artists and sharks. I read a few days ago that one of the “Stan” nations is seriously considering a debt jubilee in the country. That’s how you resolve this problem. We owe the stealing bastards nothing except to give them life sentences at hard labour. Let’s get real, and at least a little bit smart. Fool me once, shame on you, fool me twice, shame on me.

    • Sha’Tara, you always have interesting views, but I must push back on you. Debt is a key reason Greece had to change its spending, so the banks would lend them more money. Right now, the interest cost in the US is a large budget item and, if left unchecked, will exceed all other items.

      So, the debt has importance. China could put a huge hurt on the US by ceasing to buy our Treasuries. At the end of the day, our ability to pay for things is critical. As the intetest cost grows, it will impact that ability.

      Keith

  2. Has the term “fiscal responsibility” lost all meaning in our government? And … despite all this, Trump is hellbent and determined to have his wall at any cost. Meanwhile, Exxon, Amazon, and hundreds of other corporations will pay no income tax again this year. Something is very wrong with this picture. We can raise or lower the debt ceiling, pass irresponsible tax cuts, put in place or remove spending caps, but the bottom line is that there comes a point when there is no more borrowing, when our reputation is ruined, when we are known as the country that doesn’t pay its debt, when we are further downgraded by Standards & Poors … there comes a day when we pay the price for all this perfidy. Funny, isn’t it, how under Obama the republicans screeched for lowering the debt & deficit, for a balanced budget, yet today it’s party time.

    • Jill, totally agree. The Freedom Caucus deserves an extra dose of scrutiny. Complaining mightily when the debt was $5 trillion, then $8 trillion, then $13 trillion. Then, when it was $21 trillion, they voted on a tax law to increase it further. More than any group, they need to answer the questions of what do you plan to do about it and why did you make it worse with a Republican in the White House? Keith

      • Absolutely!!! My own representative, Warren Davidson, is a member of the Freedom Caucus and I give him grief on a weekly basis. Funny, during his August recess, he went to all the rich neighborhoods and held Town Hall meetings, but didn’t come to our poorer neighborhood a single time. I believe it’s about time for me to write him another letter.

      • Jill, I applaud any polician that visits with constituents, but it cannot be just with those who support you. Maybe you should send him The Concord Coalition pieces. As an accountant, you know what too much debt means. Keith

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