CBO: Budget Deficit Numbers Are Better Than Expected, but We're Still Screwed

Unless we make some big changes, things won't get much better.


Christy Bowe/ZUMA Press/Newscom

A new report from the Congressional Budget Office (CBO) highlights several troubling trends in federal spending.

The CBO projects that the deficit for fiscal year 2019 will hit $897 billion. While this represents a $118 billion increase over last year, it's actually not as bad as expected: The nonpartisan office predicted last April that the budget deficit would reach $981 billion in 2019 and surpass $1 trillion in 2020. "That reduction in projected deficits results primarily from legislative changes—most notably, a decrease in emergency spending," the CBO says in a summary of its findings.

But that's just about the only good news. The deficit is expected to hit $903 billion in 2020 and $974 billion in 2021. In 2022, it is on track to surpass $1.1 trillion.

The rising budget deficit means the national debt, which reached $22 trillion at the end of 2018, will continue to go up as well. The amount of publicly held debt—the money the American government owes to domestic and foreign investors—will be particularly affected, rising to $16.6 trillion at the end of the 2019 fiscal year.

"Relative to the size of the economy, that amount—at 78 percent of GDP—would be nearly twice its average over the past 50 years," the report notes. "By 2029, debt is estimated to reach $28.7 trillion, or 93 percent of GDP—a higher level than at any time since just after World War II." Publicly held debt could reach "about 150 percent of GDP by 2049."

So what's to blame? It's simple: The amount of money the federal government takes in isn't keeping up with the amount it spends. Revenues are projected to rise from $3.5 trillion in 2019 to nearly $5.7 trillion in 2029. But expenditures will rise faster, from $4.4 trillion in 2019 to $7 trillion in 2029.

The biggest culprit is mandatory spending—most notably, Social Security and Medicare—which is projected to rise by about $1.9 trillion from 2019 to 2029. "The aging of the population and the rising cost of health care contribute significantly to the growth in spending for major benefit programs," the report says. Yearly Social Security spending is projected to rise from roughly $1 trillion to $1.9 trillion over the next decade. Medicare spending will nearly double, rising from $768 billion to $1.5 trillion in 2029.

This sort of spending is not sustainable. Both programs will be insolvent within the next 15 years unless major changes are made.

Unfortunately, very few politicians seem interested in cutting spending. Donald Trump explicitly promised during his presidential campaign not to cut Social Security or Medicare spending. Even former House Speaker Paul Ryan (R–Wisc.), a supposed budget hawk, was a complete failure when it came to balancing the budget.

Bonus link: Why trillion-dollar deficits are here to stay.

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  1. Shit, I know how this works. You just apply for as many credit cards as you can get, load them all up as fast as possible, convert to invisible assets like cash buried somewhere, then declare bankruptcy.

    1. If The Hag had won, her top economics dog, Joe Stieglitz was advocating for emulating Venezuela’s policies.

      So it could be worse.

      1. That’s what we are doing. The argument in Washington is over what the assets should be, and who gets to pocket them.

      2. Yes, he was praising the tax the rich nationalize the oil industry policies to provide for the people. Then the investment in the oil industry declined big time as did the revenues and now the people have less than before.
        This is the lesson of socialism, Venezuela just reached the endpoint faster than most.

  2. it’s actually not as bad as expected:

    Isn’t “not as bad as expected” the new “everything’s great”? Or are Jerry Brown’s “budget surpluses” just smoke and mirrors?

    1. Smoke and mirrors? Maybe obfuscated bullshit.

  3. But expenditures will rise faster, from $4.4 trillion in 2019 to $7 trillion in 2029.

    Even that ridiculous 70% marginal tax rate won’t fill that hole.

    1. I read somewhere, (not facebook) that the top 28 wealthiest people in the US hold 1.4 Trillion dollars.

      That won’t last long.

      1. I once added up all the assets of the Fortune 400 or some other similar list. Definitely not the top 20, it was a respectable number.

        If you confiscated all those assets, it woudn’t pay the deficit for a single year. Or maybe it would have for one year. Whatever the time period, it wasn’t much.

        And that assumes all those assets are cash on the barrel head, immediately liquid. But most of them are just investments, and they only have value if someone else buys them, but guess what, all the people who could have bought them had their assets confiscated.

        And if those assets are jewels or paintings, you’d get pennies on the dollar at auction, again because all those who could pay are now broke.

        Yachts? Biz jets? Good luck.

  4. I might add that one of the problems is that the Fed is holding onto about $5 trillion in debt picked up by way of post 2008 quantitative easing. If there is $16.6 trillion in privately held debt out there, the Fed’s holdings represent a hefty chunk of that debt. The Fed’s decision to stop buying more of it and just letting their holdings expire is a big part of the reason why we’ve experienced so much market volatility over the past few months. How can the market know how to price that debt (or where interest rates should be) if a chunk that big is effectively out of circulation?

    How much would interest rates rise if the Fed were to sell off that debt? Of course, no one knows, but the interest demanded at new auctions would be higher. While lower interest rates tend to be good for economic growth, not all growth is good for the reason that not all investments are good investments. There’s this thing called “uncertainty”. Markets and price signals make participants behave as if they possessed knowledge they probably don’t. When interest rates are low, people buy homes they shouldn’t, businesses expand when they shouldn’t, banks make loans when they shouldn’t, etc. Another consequence of rising interest rates is that it discourages government spending.

    1. The increasing cost of debt service crowds out other spending. The Fed has been desperate to unload its treasury holdings so that the market and politicians can reasonably price the impacts of their choices. A global slowdown in economic growth is making that hard to do right now, and the Fed is in the middle of abandoning its attempt for the foreseeable future to let those bonds expire without replacing them. Someday, there may be hell to pay, but, in the meantime, the government is getting to deficit spend at an undeserved discount. They won’t have much disincentive to indulge their deficit spending urge until the market can price the interest on new debt with the Fed’s holdings back in circulation. The price signals are making it easy to deficit spend, but the Fed still has its thumb pushing down on the scale.

  5. “about 150 percent of GDP by 2049.”

    Hell, with the newest crop (or is that crap?) of socialists now invading Congress, running up the deficit to those levels would be viewed as underachieving in their minds.

    1. Need to overthrow anyone who isn’t conservative or libertarian. Dispose of the rest.

      1. What the fuck have conservatives done other than jack spending up just as fast as Democrats?

        1. You’re confusing real conservatives with republicans. For example, Paul Ryan and Kevin McCarthy are not in any way conservative. They are morally bankrupt big spending, open borders sellouts. Anyone who is not willing to immediately make at least a nominal cut in actual year over year federal spending is not a conservative.

          1. You’re confusing the rest of us for people that care to play “No True Scotsman”.

            1. I don’t give a fuck what you think, or don’t think. My statement is correct. If you want to go jack off in the corner, that’s up to you.

        2. Lost the culture war?

          Obeyed the preferences of the liberal-libertarian mainstream?

          Clung to superstition and guns?

          Branded the Republican Party with bigotry and backwardness for at least a generation?

          Stuck with declining towns and dying industries against all evidence?

          Kept Benny Hinn, tobacco companies, Jerry Falwell Jr., and that My Pillow guy in business?

          1. The landfill awaits you, fucking commie. Speaking of clingers, I hope you still cling to life when they bury you with your progtarded pals, en masse.

          2. Hey, Rev!

            Shouldn’t you be burning villages and locking up unbelievers in your reeducation camps just like the rest of you Communist comrades?

            You spend way too much time here spewing hate when you have so much work to do building and filling up gulags.

  6. We’ve been screwed since about 2008, when they passed TARP, and put the nation radically deeper into debt to make sure the financial sector didn’t take a haircut from having made really stupid investments.

    That was about the point where the national debt got so big that economic booms stopped helping; You reach a point where the increased interest due to rising interest rates exceeds the increased revenue due to the boom, and an improving economy actually increases the deficit.

    That’s why the Fed has been lowballing inflation numbers for most of a decade, to keep carrying costs down even if it depresses the economy. Now that Trump’s in office they’ve decided they have the right patsy to take the blame for a crash…

  7. This is all fake news looking to undermine Trump’s contributions to the booming American economy. Every libertarian knows that Keynesian deficit spending is the least government can do to make up for all the deadweight loss brought on by overregulation and the welfare state. Once our master deregulator strikes again taxes can be further cut while government coffers will quadruple from the freed up asset investments. Imagine how good the economy would be if the Fed was not subversively trying to raise interests back up toward the market rate.

  8. “but We’re Still Screwed”

    Do you have a mouse in your pocket? Who’s this “we” you’re talking about. It’s their budget not mine.

  9. As long as we’re talking about deficits primarily as being a spending problem, you’re just perpetuating the issue.

    Conservatives like to talk about mandatory spending like it’s a cost that can just be disappeared. Sorry, but no. You’re talking about cutting or phasing out Medicare and Social Security precisely at the time that a new generation of retirees are entering retirement without private pensions, retirement medical benefits, or enough money put aside to get them through an extended retirement. The private sector is not ready, and likely will never be ready, to pick up the slack.

    So – realistically speaking – even setting aside the political third-rail considerations, any truly effective cutting at the federal level will just push those costs down to states and localities that will find themselves burdened by growing elderly populations living in poverty.

    We can’t tax our way out of the problem, but we shouldn’t ignore higher taxes as a tool to deal with the issue.

    1. Fuck off, Simon the progressive.

      How about national endowment for the arts?
      How about foreign aid?
      How about education?
      And on and on and on.

      Plenty of fat to trim, and that’s not even getting into the rampant fraud/corruption

    2. The private sector is not ready, and likely will never be ready, to pick up the slack.
      The government isn’t, nor ever has been, ready to pick up the slack either. The problem is that promises were made, and no one has the ability to fulfill them. Higher taxes will simply push the problem to the next generation

      Personally I have accepted that I will pay Medicare and Social Security taxes for my entire life, but I won’t be able to make use of either program because they simply won’t be able to last until its my turn to retire

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  11. Government is reactive, not proactive. Nothing will be done about the deficit until there is a meltdown. And the first thing that will be done is point at the other side.

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