Grim Budget Outlook
Please consider the CBO’s Budget Outlook 2020 to 2030 as revised in September.
Key Details
- Deficits. CBO projects a federal budget deficit of $3.3 trillion in 2020, more than triple the shortfall recorded in 2019. At 16.0 percent of gross domestic product (GDP), the deficit in 2020 would be the largest since 1945. The deficit in 2021 is projected to be 8.6 percent of GDP. Between 1946 and 2019, the deficit as a share of GDP has been larger than that only twice. In CBO’s projections, annual deficits relative to the size of the economy generally continue to decline through 2027 before increasing again in the last few years of the projection period, reaching 5.3 percent of GDP in 2030. They exceed their 50-year average of 3.0 percent in each year through 2030.
- Debt. As a result of those deficits, federal debt held by the public is projected to rise sharply, to 98 percent of GDP in 2020, compared with 79 percent at the end of 2019 and 35 percent in 2007, before the start of the previous recession. It would exceed 100 percent in 2021 and increase to 107 percent in 2023, the highest in the nation’s history. The previous peak occurred in 1946 following the large deficits incurred during World War II. By 2030, debt would equal 109 percent of GDP.
- Outlays. Federal outlays are projected to equal 32 percent of GDP in 2020, 11 percentage points (or about 50 percent) above what they were in 2019 and the highest percentage since 1945. Projected outlays fall relative to GDP over the following four years, as pandemic-related spending wanes and low interest rates reduce net interest outlays. In the second half of the projection period, outlays rise from about 22 percent of GDP to 23 percent in 2030. That change results from increased spending for major entitlement programs because of the aging of the population and rising health care costs, as well as from increasing net outlays for interest due to rising interest rates and debt.
- Revenues. Federal revenues are projected to fall from 16.3 percent of GDP in 2019 to 15.5 percent in 2021, primarily because of the economic disruption caused by the pandemic and the federal government’s response. Revenues rise after 2021, reaching almost 18 percent in 2030, as a result of the expiration of temporary provisions enacted in response to the pandemic, scheduled increases in taxes, and other factors.
- Changes Since CBO’s Previous Projections. CBO’s estimate of the deficit for 2020 is now $2.2 trillion more than the agency estimated in March 2020—mostly because of recently enacted legislation. CBO now projects a cumulative deficit over the 2021–2030 period of $13.0 trillion—$0.1 trillion less than the agency projected in March. That 10-year decrease is the net result of changes that go in opposite directions. Lower projected wages, salaries, and corporate profits, as well as recent legislation and other changes, increase deficits, but lower projected interest rates and inflation reduce them.
CBO Debt Projection
Federal debt in 2030 would equal 109 percent of GDP, nearly 30 percentage points higher than it was at the end of 2019.
Mish
A failed promise of Trump’s. Somehow overlooked by Dems, it’s Trump’s most vulnerable chink in his armor.
Running up the debt is part of the plan. At some point, the American people will be given the choice to either accept a “new Constitution” and an authoritarian socialist government, or face a major bail in, which would entail taking a large part of their personal wealth.
Of course their wealth will eventually be confiscated anyway, regardless, because the debts must be serviced somehow…… There is no free lunch.
This is evidence of the terrible leadership, at all levels of government, unwittingly working together to kill our country, one bad decision at a time.
John Whitehead’s Commentary
Since 9/11, the Government’s Answer to Every Problem Has Been More Government
September 01, 2020
Is this why people are leaving the big cities?
An interesting point in the video is that in a very large city it is actually a very small percentage of trouble makers that can be a big problem. The thing is we are very far from even a small percentage anywhere is the US … My guess is the worst trouble-makers (antifa, anarchist rioters) in Portland and Seattle probably number in the hundreds, not the thousands. If the number was 10,000, we’d have a big problem.
There will be more as peopl hit the end of their economic rope.
Yup, there are going to be a lot of people with their heads underwater if politicians don’t relent and allow all businesses to reopen country wide.
When I look at these people featured in a NYT story today, I don’t understand how they get by or honestly, why even keep trying? The husband works in a commission only job, so his pay varies depending on what he sells. The wife has gotten called back to work at an $11.40/hr job working in a school cafeteria. The extra $600 the government was paying weekly seems to have made a huge difference to them.
“Troublemaker,” ultimately resolves to “enough resources (as in useful arms) to cause trouble”, AND “nothing left to lose.”
Hence why the niggas weren’t extended 2nd amendment protections in Antebellum. And places like Portland, Seattle etc., is so darned bent on keeping it that way.
Only half kidding here–maybe this debt can be used to make a precise prediction. I.E., Trump ran lots of businesses into the ground. What I am not sure of, is what he did with what was left? That is perhaps what happened with the business he bankrupted will happen to the country.
If someone can describe that a bit, we might know what the US will look like in a year or four.
Sold it off cheap to his cronies. Get ready for Fire Sale America!
The people are about to learn there is no such thing as free money. Every penny the government gives away, it has to borrow first.
It borrows this money in your name, and you owe the debt, not them. They have no money, their debt is your debt.
While repayment of the debt is impossible at this point, the service on the debt must be paid. Debt service is currently about 20% of the budget, and that percentage is slated to explode upward as the government continues to borrow irresponsibly.
Debt to GDP 98% ? GREAT ! In Japan it s over 200% You still got some leeway…..Keep on monetizing folks !
And with nothing to show for it,just like Obama,Trump and Obama,Dumb n Dumber,these 2 sorry ass clowns pumpin trillions into Wall Street while the economy goes completely to shit!
Where is the Tea Party? AWOL.
They must not have been very serious eight years ago after all.
The few I knew couldn’t handle remedial math.
Older types (sucking up entitlements) who thought a few budget cuts (NEA always a favorite with them) would do the trick.
Pointed out that if ALL discretionary (budget that Congress actually votes on) eliminated there would still be a deficit (or close to it) because non discretionary spending (entitlements) something like 2 / 3 of fedgov spending. They wanted no part of entitlement cuts. Cut SOMEONE else’s spending.
The tea party is busy decoding secret messages about the Democrats satanic pedo pizza sex dungeon.
They are dumb deaf and blind Trump voters.
Absolutely right Hillary. They are deplorables waiting for the change Obama promised.
The Tea Party was a colossal failure because of lack of intellectual leadership. They famously didn’t like big gov and entitlements … except for the Social Security and Medicare checks they had coming. Way to have integrity guys. Actually the fact that most went on to be rabid Trump supporters tells you everything you need to know about how little they wanted true capitalism.
The most activist spawn of the Tea Party movement today can be seen riding in the back of pickup trucks with Trump 2020 flags, bear spray, and paintball guns.
And a coincident marker
189,696 KIA dead US soldiers WW2
189,964 dead in coronavirus epidemic 9/2/2020
Deficits and deaths.
But the WW2 deficit was for the entire war.
And we have more to go with the pandemic.
Equating the 6 months lost to an already ailing 86 year old to the 816 lost to able-bodied youth kind of marks you as a crank.
A crank–no, not really.
One set was in the service of a noble cause. The other is in the service of… what?
I’m glad you feel at ease with the deaths, because I don’t. And what isn’t seen in that number are those that will have long-term effects.
“The death of one man: that is a catastrophe. One hundred thousand deaths: that is a statistic!”
From my comparison, you should begin to realize that the world-wide scale of effects of the pandemic is at the scale of WW2 effects with its disruptions. It’s not about you or me, it’s all about what is going on in the world.
For reference on how things could be:
Vietnam and CV– 96 million people, 1046 cases, 35 deaths, and they have a growing GDP– they have 0.4 deaths per million (US has 574 per million).
You should rightly feel shame about those statistics and the performance of the US in relation to the pandemic and our inability to deal with the economy.
Cut off in their prime….
New data helps illustrate what Big Ten Commissioner Kevin Warren might have meant when he described “too much medical uncertainty and too many unknown health risks” as reasons for postponing the Big Ten’s 2020-21 fall sports season.
During a State College Area school board of directors meeting on Monday night, Wayne Sebastianelli — Penn State’s director of athletic medicine — made some alarming comments about the link between COVID-19 and myocarditis, particularly in Big Ten athletes. Sebastianelli said that cardiac MRI scans revealed that approximately a third of Big Ten athletes who tested positive for COVID-19 appeared to have myocarditis, an inflammation of the heart muscle that can be fatal if left unchecked.
“When we looked at our COVID-positive athletes, whether they were symptomatic or not, 30 to roughly 35 percent of their heart muscles (are) inflamed,” Sebastianelli said. “And we really just don’t know what to do with it right now. It’s still very early in the infection. Some of that has led to the Pac-12 and the Big Ten’s decision to sort of put a hiatus on what’s happening.”
I can tell you with absolute certainty, that the people of Iowa are extremely pissed off right now that football has been cancelled.
…There are currently 10 Iowa counties reporting a positivity rate greater than 15% over the last 14 days. Public schools in Johnson, Story, Plymouth, Sioux, Carroll, Howard, Bremer, Lee and Marion counties can apply for a waiver to change to distance learning. Johnson, Story, Plymouth and Sioux counties report a positivity rate higher than 20%….
Iowa’s 2 favorite pastimes are dive bars (year round) and Hawkeye football season.
To get people to accept the kind of onerous taxation required to even begin to get this under control, it’s quite likely that our fearless leaders will start a war…..and not just some lopsided war of occupation to control the flow of oil…but rather the kind that we will experience on a more personal level. I think history suggests this, never mind that our current dangerous saber-rattling with China also does, as well.
No wonder the Fed would like to see some inflation. It’s the only acceptable way to tax people without political consequences. But that isn’t working out too well in our 21st century tech-driven economy.
We seem to be in a real time experiment to see just exactly how much our financial system can be abused without imploding. I expect there is a limit, and that we alive today will get to see it. But we might not be quite as close as some fear.
“CBO projects a federal budget deficit of $3.3 trillion in 2020, more than triple the shortfall recorded in 2019.”
…
A KEY point with CBO projections. They make no assumptions and reports based on current legislation. FY20 ends September 30 … probably too late for next stimulus to show … but if passed in next 10 days? With some of the $$s expedited? It could easily bump up current year deficit.
Yuuuuuuge deficit! Everyone is saying it’s the biggest ever! MAGA!
Those projections seem like a pipe dream to me. I wonder what the 2005 projections were for 2020?
I don’t know about 2005, but when Bill Clinton left office in January 2001, economists were predicting that the US national debt would be fully paid off by about 2010. Some were even concerned about how the Fed would eventually conduct monetary policy with no Federal debt outstanding. They need not have worried. Two Federal tax cuts, the costly Middle East wars and the Great Recession ensured a large supply of Federal debt even before anyone had heard of Covid-19.
I got my first lesson on inflation at the age of 9 when I started collecting stamps and noticed that some of my German stamps had very high denominations. I still have the 20 milliard (billion) Reichsmark stamp that would have been issued in 1923. By the end of 1923, it took at least 1 trillion Reichsmarks to buy a US $ and many ordinary Germans had seen their savings wiped out by events that they did not understand. The politicians in Washington are playing a very dangerous game.
‘economists were predicting that the US national debt would be fully paid off by about 2010″
And yet idiots of all stripes, still persists in falling for the undifferentiated idiocy attempted passed off as “empirical” “economics.” As any of it had even an infinitesimal iota of utility; aside from acting as coverup for simplistic, crass theft; whatsoever.
A “bird in the hand” today is worth two birds in the bush tomorrow.
But no birds in the hand forever, on account of all future ones long since having been stolen and burned to feed rank idiots contributing nothing in return, is worse than either.
The Viet Nam War was the beginning of the end. The French called our bluff and Nixon bailed out on the Gold Standard early 1970’s. There has been nothing to curtail spending from either party. Do you think Biden is going to curtail spending? PLEASE. It will get worse. Neither party has the gonads to tackle this issue and Americans too dumb to care-most. When Trump came into office, he increased military spending by what, 100 billion plus? I knew then that he’s no different than others. We are doomed. Have that vacation home in either a conservative part of the country or better yet, a place outside this country when this hits. To paraphrase Gerald Celente “when things get crazy then people get crazier.”
You forgot the HUGE difference for us vs. the rest of the world: The United States has a printing press, that is secured by Aircraft Carriers, that protect the oil and our petrodollar. The dollar is still the worlds pimp-player-baller-shotcaller. Only a major war will change that.
The US is secured not by Carriers but by Ohio Class Subs (OCS) on constant deterrent patrol. The US is depending on them to remain viable beyond their original 30 yr. service life. A major war will only occur if the US fails to recapitalize/deploy its replacement before the OCS breaks down.
Hegemon Stability Theory states the fastest growing/ biggest economy gets to play hegemon. A country full of over extended fat blathering fools vs organized producing China means those days are over. Capital will bet that way also
“Capital will bet that way also”
Or at least would, if there were any left after a century long, Fed fueled seedcorn bonfire.
Who wil have the courage to reverse the Republican tax cuts? Don’t see how we slow the bleeding wihtout that. Too many give aways. Farm aid, Wall Spending. You’ll never convince anyone to take a hit on entitlements when that level of corruption goes on
Yup. The problem with entitlements is they become part of the social fabric that provides stability. Without these we regress to the grimy era of L.A./NYC circa the late 70’s and 80’s. Remember when gangs and crack ruled the streets? Ghettos were true ghettos, unlike today where Inglewood and Compton have gentrified into $500k homes. The same homes that were worthless and crime ridden back in that era.
“The problem with entitlements is they become part of the social fabric that provides stability. Without these we regress”
lol…is this a joke?
Unfortunately no, I’m referring to the “hood mentality”. What do you think happens if we take EBT away from South Chicago, San Bernardino, etc? I’ll tell ya what happens, it’s chitty chitty bang bang. Hence my reference to the 70’s/80’s. Go watch Boyz N The Hood or Menace 2 Society.
Rep cut taxes. Makes them look good when dems raise them.
…chitty chitty bang bang….
It’s not just in the hood, it’s in the suburbs and rural areas.
It’s not a good mix–meth and guns and a need to blame someone for their ills.
The entire country is suffering from differences between expectation and reality.
The pressure will be on to reverse the corporate tax cut, for sure. The only problem is that you can’t really tax corporations. If a corporation can’t pass the tax cut on to consumers, it dies. Therefore, a corporate tax cut is just a hidden tax on consumers. But, the operative word here is “hidden”. Since they won’t pay it directly, consumers won’t notice.
Depends on the price elasticity of demand.
The only entities that can “pay taxes” are ones at the end of the food chain, for whom the choice is “pay taxes” or “consume”. Most consumers don’t have the ability to say “oh, my taxes went up, I’ll charge more for my labor”, so instead, when their taxes go up, their consumption goes down. Businesses aren’t consumers, so they never face that choice. Instead, they pass the tax on to consumers, or to owners. It technically is possible that they could pass the tax on to employees as well, by reducing pay, but that usually doesn’t happen.
Now, you might ask, if businesses have the capability of raising prices, why wait for a tax increase? The answer is that a tax increase will affect not only them, but also their competitors, so the the effect is uniform. The interesting thing is that the reverse effect is different. When taxes go down, businesses do not generally lower prices. Instead, profits go up, and thus the benefit flows to owners, which was why we saw a stock price surge when corporate taxes were decreased. The benefits also flowed to employees, in the form of raises and bonuses. In the end, though, it all flowed to individuals.
That brings up to the question of what will happen if corporate taxes are increased, reversing the tax cut. The effect will not be the direct reverse of what happened when the taxes were cut. A direct reverse would mean pay cuts and a crashed stock market. Instead, I think it is more likely that they will attempt to raise prices, and pass it on to consumers, though no doubt it will have a negative effect on stock prices and on employee compensation. Businesses try to avoid showing declines in reported earnings at all costs.
The U.S. will rank #3 in debt to GDP ratio.
I don’t hear any prominent voices communicating this problem.
Maybe we need another Ross Perot to get the message out.
I’m skeptical of the CBO’s projection in that as Mish has stated previous, GDP is a significantly flawed attempt at measuring productivity/product. Rothbard pointed out the “G” portion of the equation should be deducted, not added, to any attempt to measure such. (and I think he was right)
But further, the “off books” antics surrounding the actual debt(think S.S. for example, or the Post Office) makes me very skeptical the CBO can even reasonably calculate the “debt”, even setting aside the joke that is the GDP calculation.
I’m sure you’ve seen some people suggest the actual debt is much, much higher.
Let’s keep in mind the US gov’t doesn’t even know how much physical US money is floating around the world….yet the CBO claims it can measure the debt to GDP…lol
“I don’t hear any prominent voices communicating this problem.”
…
The US has NO leaders. Just spenders.
Last attempt at any sort of budget control was 2011 with Budget Control Act (1 year of sequester before Congress voted to Screw This). I laughed at Speaker of the House John Boehner when he would often use code “we need to have an adult conversation” rather than explicitly saying there needs to be a curtailment in entitlements.
Did not think much of him then. Now? I would roll out the red carpet … and light up his cigarette and pour him a glass of red wine.
A couple of years ago Rand Paul tried to get the Senate to agree to cut back government spending by 1%. The reaction was like he was suggesting they kill children.
Debt/GDP is not a relevant metric, it’s Debt/Revenue: Does your business service debts from total sales or from earnings?
That makes the USA NR#1, double/triple even EU country ratios. And the debt is not consolidated public liabilities (GSE’s, Trust Fund Bonds, local and state liabilities), so it’s comparing prunes to plums.
Need to throw in contingent liabilities, too.
Alan Greenspan (of all people) actually made the good point of keeping track of contingent liabilities. If you allow corporations to get so large that they present a systemic risk to economy (TBTFs), USG might have to step into to save (support balance sheet) at taxpayer’s expense. Wanted this reserved for Wall Street … pissed that Obama stepped in to rescue GM.
Why – AGAIN – are TBTFs allowed????
“Why – AGAIN – are TBTFs allowed????”
Because they facilitate robbing the productive for the benefit of the idle and uttery useless connected. Which is all that America in the Fed era is all about.
Well this is for Spain, and it’s very quaint to call new debt funds, but I suppose those paying are too young to know the difference.
“The magnitude of the €140 billion, roughly split between grants and loans, that Spain will receive from the Next Generation EU programme can be seen from the fact that it is more than the total funds of the US$12 billion Marshall Plan (equivalent to €112 billion today), launched in 1948 by the US after World War II to help re-build 16 non-communist countries in Europe, and from which Spain was excluded because of the pariah status of the Franco dictatorship.
Including the €30 billion of structural funds for 2021-27, the €170 billion at Spain’s disposal (12% of GDP) is three times more than the €56 billion of cohesion and rural development funds received under the EU’s 2014-20 budget.” William Chislett, Elcano.