CBO

CBO: Deficit is Down, But Debt Remains High

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Whitehouse.gov

The Congressional Budget Office released another report on the nation's debt and deficit picture today, and the short version goes something like this: We've made some short-term progress in reducing annual deficits, but the long-term debt picture is still quite bleak. It's the calm before the storm more than a sign that all is well.

There's no question that the fiscal situation is better than it was a few years ago. This year's budget deficit will clock in at just $506 billion—not a small amount, but far less than the $1 trillion overruns we saw during President Obama's first term. This year's deficit will even be slightly smaller, relative to the size of the entire economy, than is typical over the last four decades. Projected Medicare costs—a major driver of long-term debt—have continued to be reduced compared to the increases the CBO expected just a few years ago.

But some of those Medicare savings are based on cuts that, as Medicare's Trustees have hinted rather strongly, may not ever materialize. And some of them are based on projections of slowing health spending that could easily be wrong, as much of the slowdown has been attributed to the economy.

Meanwhile, even as annual deficits have declined, total federal debt levels have remained high. And they are expected to rise to unprecedented levels in the years to come. By the end of this fiscal year, the CBO says, federal debt held by the public will equal 74 percent of GDP, double its 2007 level, and higher than at any point since 1950. Then it gets worse. "The persistent and growing deficits that CBO projects would result in increasing amounts of federal debt held by the public," the report says. Starting in 2018, deficits start to rise above average levels again, pushing debt as a percentage of GDP up to 77 percent in 2024.

The higher the debt levels, the bigger the problems for the nation, especially when debt levels are this high. As the CBO notes (and has said repeatedly in previous reports), higher debt means higher federal spending on interest to maintain the debt, lower economic growth rates, less flexibility for policymakers in all matters, and an increased risk of a fiscal crisis. Basically, debt costs money to carry, and robs the nation of other options: the more a nation owes, and the more it spends on debt, the fewer choices it has to do other things, which creates a kind of precarious state in which really big problems—like a fiscal crisis—are more likely, and harder to deal with when they do occur. It's a fiscal feedback loop, and it's threatening to drag us down.

The Obama administration has tended to treat the recent decline in annual deficits as a kind of problem solved. It's not. The problem is a little smaller, but it hasn't gone away so much as been postponed. That's a good thing, but it's not enough. 

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  1. Basically, debt costs money to carry, and robs the nation of other options: the more a nation owes, and the more it spends on debt, the fewer choices it has to do other things, which creates a kind of precarious state in which really big problems?like a fiscal crisis?are more likely, and harder to deal with when they do occur.

    All right, time for a few more wars. Then, on to the infrastructure problems!

    1. Bah – we’ll just print more. No worries!

      1. 3-D-printed bridges! Brilliant!

        1. Bridges, money, guns – there’s nothing we can’t solve with a printer!

  2. *lights the shriek signal*

    1. Is that like the bat signal except with this?

      1. I regret taking a huge swig of water before clicking on that.

        I hope I didn’t short out my laptop…

    2. “You just contact the mayor’s office. He has a special signal he shines in the sky; it’s in the shape of a giant cock.”

  3. This year’s budget deficit will clock in at just $506 billion

    How is that possible, when its already nearly a trillion for the fiscal year?

    Total debt outstanding 10/01/13 – 08/26/14 = $965BB

    Debt held by the public 10/01/13 – 08/26/14 = $760BB

    http://treasurydirect.gov/NP/debt/current

    Seriously, where does that $506BB number come from?

    1. Aren’t those numbers “debt”? The deficit number is a guestimation seeing as how we don’t actually have a working budget right?

      1. Those numbers are the increase in debt for the current fiscal year, according to the Treasury (which issues the debt and should know).

        The increase in debt is also known as the deficit.

        Where does that CBO number come from? I know they are “projecting” the deficit for this (presumably fiscal) year. But the actual deficit for the fiscal year to date is way over their projection, and its not going to come down in the next 5 weeks.

        So WTF are they talking about?

        1. FYTW?

          If I had to guess, that number was directly pulled out of someone’s ass. Or it’s only the deficit for the first quarter cause they don’t want to talk about it doubling? Either way I’m sure some leftard will come along at some point to tell us how we are wrong.

          1. I’m sure some leftard will come along at some point to tell us how we are wrong.

            Once they get their talking points they’ll be along to explain to us how debt only matters when a RETHUGLIKKKAN is president, and anyway only racists care about the national debt.

    2. Debt Clock says $562 billion and counting. I find it hard to believe too.

      http://www.usdebtclock.org/

      1. One of those sites is wrong. Or I can’t do math good.

        1. Fuzzy math.

      2. I’m going with what the agency that actually issues the debt, and knows what it is “to the penny”.

        And they are saying that we are looking at another trillion-dollar deficit this year.

        1. I believe there’s been disparities between the Treasury’s final FY statement and the debt to the penny calcuations in the past, but not to the degree we’ve seen this year. I suspect it has to do with the $328 billion that accumulated and Jack Lew was shell-gaming from about March 2013 until the shutdown ended. That figure was never tacked on to the FY13 nor October-November 2013 Treasury statements, but it still had to be counted as part of the overall debt.

          So either FY13’s deficit was larger than recorded, or it carried over to FY14 and the Treasury never included it in the final monthly accounting.

  4. Seriously, Peter, can you track down the gap between what the Treasury says the deficit is, and what the CBO says?

    Those numbers I cite above are from the Treasury’s own website. I assume they are the authoritative numbers for the increase in debt (which I believe is the real deficit number). Is the CBO using a different timeframe? A different definition of debt? I see their weaselly IRS collections minus Congressional spending definition, but that just opens a whole ‘nother can of worms.

  5. Wow! $506B!
    His smallest deficit EVAH!
    …just $46B LARGER than GWB’s largest deficit.
    I am overwhelmed by the fiscal responsibility of this Administration – NOT!

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