“The national debt is currently higher than at any time in history outside of World War II and the years immediately after, and it is rising unsustainably. Moreover, recent tax and spending legislation have made a bad situation even worse.…. Spending under our baseline projections will rise from 20.8 percent of GDP in 2017 to 24.3 percent by 2028 (25.3 percent in our alternative scenario), the second highest level in modern history. Revenue will remain between 16 and 18 percent of GDP until the recent tax cuts expire (and beyond that under our alternative scenario), which is unusually low for a healthy economy.” (CRFB, Updating the U.S. Budget Outlook, March 2, 2018)
Because of the substantial number of changes to American tax and expenditure legislation, the CBO has not yet released its updated longer-term budget projections. However, The Committee for A Responsible Federal Budget (CRFB) has set out some rough estimates of future budget trends based on the CBO methodology and data.
Frankly for a person who is not normally thought of as a budget hawk, one can’t help but conclude that the fully employed U.S economy will face a rapidly worsening budgetary problem in coming years. Moreover, it is abundantly clear that the American government’s fiscal situation has significantly deteriorated since Trump and the Republicans have taken over.
Note that the deficit and debt projections become much worse if one assumes that the all of the temporary spending increases and the tax cuts are made permanent.
The CRFB estimates indicate that, by using this very realistic alternative budgetary assumption, the U.S. government debt will exceed GDP within a decade and in fact that the U.S. could encounter a $2.4 trillion deficit and a 113% debt to GDP ratio by 2028.
Bear in mind that even starting with the advantage of having a strong and roughly fully employed economy, the U.S. government was still running a $753 billion deficit in 2018.
