Economics

Uncle Sam Doubles Down on His Spending Addiction

The federal government is not a good steward of your money.

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My fellow taxpayers, this is your quarterly warning that Uncle Sam is not a good steward of your money. The Congressional Budget Office just released its most recent 10-year projections for federal spending and revenues. The picture is not pretty.

A quick overview: This fiscal year, 2020, the federal government will collect $3.6 trillion in tax revenues. But due to its spending addiction, the government will expend $4.6 trillion. This means that the government will have to borrow $1 trillion this year alone, in order to cover a deficit of 4.6 percent of GDP. This is the first trillion-dollar deficit not due to a global recession.

The money to fund the deficit comes from individual and institutional investors, both domestic and foreign. And for all the anti-China rhetoric out there, it's worth remembering that China is the second largest foreign investor in our federal debt, right behind Japan. I guess that's one Chinese import the Trump administration doesn't seem to mind.

According to the CBO, this enormous overspending will continue and expand over the next decade, from 21 percent of GDP to 23.4 percent. Revenue as a share of GDP is projected to grow from its current 16.4 percent level to 18 percent in 2030, or $5.75 trillion. But that's not enough to cover the $7.5 trillion the federal government will spend then, hence a projected budget deficit of $1.74 trillion.

Because deficits accumulate, it's not surprising that our debt is growing. Debt held by the public will rise from 81 percent of GDP today to above 98 percent by 2030—from $17.2 trillion today to $31.4 trillion then. When you add in the debt that Uncle Sam owes to other accounts within the government, like Social Security, you get a much bigger number.

All of the above, of course, assumes that the law as written today won't change. The CBO scores our budget outlook on the assumption that existing legislative provisions persist. However, everyone knows that some things will change. Congress will evade rules meant to limit spending, and—as always—it will indulge in a bipartisan spending binge while refusing to let popular tax cuts expire.

This, in part, explains why deficits in this report are $160 billion higher though 2029 than in the CBO's prior estimates. As the Committee for a Responsible Federal Budget explains in recent commentary about the CBO report, "The largest contributor to the projected increase is the appropriations package enacted in December, which included a permanent repeal of taxes enacted to finance the Affordable Care Act and the revival of various zombie extenders. That package added $500 billion to deficits through 2029, with interest."

This time will be no different. There will be more spending and less revenue than projected. For instance, even if Congress is entirely under the control of Democrats, nobody really believes that they will let all of the middle-class tax cuts expire as planned in 2025. I would not be surprised if the Democrats even manage to extract some spending increases for low-income Americans from the Republicans in exchange for extending these tax provisions. Also, given an opportunity to adopt another bipartisan spending package that adds hundreds of billions of dollars to the deficits, politicians on both sides of the aisle will shamelessly expose their spending addiction.

Then, of course, depending on the president's erratic behavior on trade, the effects of the trade war could have an even worse impact on the budget than currently projected. According to the CBO, the tariffs imposed over the past two years will reduce GDP in 2020 by 0.5 percent (or more than $100 billion) and "reduce average real household income by $1,277." The administration is happy to brag about the additional revenue collected from the tariffs, but there is a negative side to these import taxes, too.

Thankfully, the economy is doing well for now. This good performance is masking many of the ill effects, not just of the trade war but also of our overall fiscal situation. The reality, however, is that a growing economy during a time of peace should not be accompanied by growing deficits.

COPYRIGHT 2020 CREATORS.COM

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  1. Ah, who the fuck cares? Dear Leader and Team Red scored a touchdown today. You go Team Red! Keep giving rich liberals like me a tax cut. Rah, rah, rah… Goooo Team!

    1. You realize, at any time, you can give as much of your money as you like to the federal government.

    2. “Keep giving rich liberals like me a tax cut.”

      You misspelled “lying scumbags”

      1. You misspelled “lying scumbags”

        “S … e … v … o”

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  3. President Sanders would immediately cut spending with the flick of his wrist.

    1. Reason’s on the Buttigieg train now.
      He’s the DNC’s new annointed one

      1. You actually said something so totally stupid, IN PUBLIC!
        Oh, it’s Nardz. Never mind. 🙁

        1. The DNC would rather lose to Trump than win with Sanders. It looks like Biden’s senility has run its course, Warren self-destructing, so Pete is their man – cheating en flagrante in Iowa now.

          1. Has nothing to do with the crazed notion that “Reason’s on the Buttigieg train now.” The DNC may well be, but no connection to Reason at all — except to the alt-right, and others ignorant that libertarians have been “fiscally conservative and socially liberal” for over 50 years now — as is a majority of voters now.

            (I’ll ignore your cheating delusion, intentionally)

            1. Of course, you will – they effed Bernie in 2016, and they will do it again. (And no, I am not a “Bernie bro”.) Yeah, I know, Debbie Wasserman Schithead just left the DNC last time because she wanted more quality time with her fam. Sure.

              I don’t give a flip whose train Reason is on – the DNC is now going with Pete, because he might be the only non-Bernie option that might beat Trump. But the more important thing to the DNC is that it is not Bernie, even if it is Trump.

              Democrats and republicans both pander pretty much to the same donor base…the corporate cabal. (Wall St., Big Pharma, Big Insurance, and most of all, Big War.) Always money for a good war…but you need to rot in hell if you don’t pay your student loans; that’s unpatriotic! It’s why nothing ever changes.

              1. I don’t give a flip whose train Reason is on –

                That’s the ISSUE. So shut the fuck up and go away.

                THE COPORATE CABAL? HOW FUCKING STUPID ARE YOU, PROGGIE?

                a) Our corporate tax rates are the highest in the world (but with a special 100% exemption for TRUMP and his cronies.)

                b) Our tax write-offs for jobs-creating capital investment are the longest in the world. (That means how long it takes to get your own money back, when creating manufacturing jobs)

                c) We’re the ONLY country in the world where health insurance is provided by EMPLOYERS.

                d) The ONLY country where corporate profits are taxed twice!
                Umm, if Bernie owns all the stock in Amazon … he owns all their assets. If Amazon pays $10 billion in corporate income taxes, DO BERNIE’S ASSETS DECLINE BY $10 BILLION?
                When Amazon merely distributes after-tax dollars to Bernie, are the same dollars taxed AGAIN (as dividends). Hello? Hello?

                e) The ONLY country that spends $250,000 or more, for six more months of life. MEDICARE is why we have the world’s most costly health care. EVEN OBAMA ADMITTED THAT.

                f) We’re the ONLY country where the millionaires and billionaires SUBSIDIZE NEARLY HALF THE ENTIRE INCOME TAX BURDEN OF OUR MIDDLE CLASS.

                You DON’T DARE let Americans know the middle class pays TWICE the taxes in your democratic socialist ideals. EVERYHING LISTED HERE MEANS THAT CORPORATIONS RULE UNDER DEMOCRATIC SOCIALISM!

                Trumptards are NOT the only brainwashed goobers!
                LEFT – RIGHT = ZERO!!

                You’re already slurping hungrily at Bill Gates’ dick. Now you want him to wash your car every week! Educate yourself, to avoid more self-humiliation. 🙂

    2. President Sanders would immediately cut spending with the flick of his wrist.

      That’s so fucking crazy, I’ll assume sarcasm.

      In three years, Trump has already added as much 8-year debt as Obama added AFTER 8 years … and Trump was elected to pay off the entire debt in 8 years!!!!

      And Trump now proposes ANOTHER unpaid tax cut! His goobers BELEEB only spending increases debt! How fucking stoopid is THAT?? 🙂

      Don’t forget Obama inherited the second worst economy since WWII .. and handed Trump the longest recovery EVER for an incoming President.

      So, Trump is the BIGGEST FISCAL failure EVER in the White House,
      Trump’s goobers also BELEEB, Trump bullshit that inherited a DYING economy!!!! 🙂
      In addition to the blatant lie, TRUMP’S ECONOMY I WORSE THAN OBAMA’S!
      1) LOWER economic growth for 3 years vs 3 years.
      2) GDP DECLINED in 2019 (from 2018)
      3) Created 2 million FEWER jobs than Obama.
      4) FAILED to improve the Labor Force Participation Rate, which he said Obama’s low rate was hiding REAL unemployment of 20-30% (also bat-shit crazy on the adjustment/correction)

      Might it soon be true? That Trump’s puppets are even crazier than Bernie.
      (Already true!)

      1. There was no recovery – all Obama did was take out the credit card and keep the party going. A policy this moron has adopted wholeheartedly.

        The biggest difference between democrats and republicans is the spelling.

        1. There was no recovery –

          Here’s proof that both you and Trump are full of shit. The official dates for our business cycles, since the mid-1800s.

          http://www.nber.org/cycles/cyclesmain.html

          all Obama did was take out the credit card and keep the party going. A policy this moron has adopted wholeheartedly.

          You screwed that up even worse! I already posted the facts to educate you.

          Plus, Obama won the 2008 nomination and was elected as a moderate — ESPECIALLY on health care. Perhaps you were in a coma on that, too.

          Obama’s clear and distinct debates and campaign promises are in a detailed video, by Gary Johnson’s 2016 campaign. On YouTube search for “Barack Obama Was Against Healthcare Mandate Before He Was For It”

          He smacked the crap out of Hillary and John Edwards on a mandate. Opposed it with MUCH better arguments than ANYONE on the right.

          Said we could not consider universal coverage until AFTER ewe bring down the costs. DUH … Which the original BIPARTISAN Obamacare would have certainly done … with a PRIVATE alternative to “the public option” demanded by his far left. So what happened?

          Crazy-fuck McConnell REJECTED a BIPARISAN deal that would have killed single-payer forever. Remember, his primary goal was to deny Obama second term, where he also failed.

          When Republicans still had a brain, they worked with Kennedy on tax cuts, which were fiercely opposed by the AFL-CIO and the far -left in Congress — but Kennedy did not need their votes! AND his tax cuts were later copied by Reagan, identically.

          So … it was McConnell who empowered the far-left in Congress.
          TARP was Bush2. And Trump has already added more new debt than Obama did ,…. AFTER 8 YEARS. So, you lose on all fronts.

          Romney’s policies are NOWHERE NEAR as crazy as Trump (THE worst President EVER

          The biggest difference between democrats and republicans is the spelling.

          I’m sure it SEEMS that way to you, but this is about individual Presidents and policies, neither of which you understand.

          1. You are full of shit. I am on Obamacare, and it is a complete DISASTER – I can only go to the doctor if I am dying.

            If you would remove your head from your ass, you would know we are just racking up debt – started under Bush, continued under Obama, and now this loser.

            It is ALL borrowed money, and a crapload of it ain’t getting paid back, and when that happens, 2008 will look like a walk in the park.

            It’s the Fed, dummy.

            Go get a fucking job instead of posting here all day.

            1. You are full of shit.

              (smirk) I never said ANYTHING about the workings of Obamacare … which you fucking lied about,

              Goober is PISSED that I provided PROOF he’s full of shit on Obama’s recovery. Obama’s final 3 years were better than Trump’s 3. for both GDP growth and new jobs.

              I am on Obamacare, and it is a complete DISASTER

              Relevance???
              It is a disaster, created by Mitch McConnell. I’d link to THAT proof, but you’d just screech even louder.

              I can only go to the doctor if I am dying.

              Show of hands … does anyone believe THAT bullshit? Anyone at all?

              If you would remove your head from your ass, you would know we are just racking up debt – started under Bush, continued under Obama, and now this loser.

              I never said otherwise. But, you’re too fucking stupid to know that Trump has added more debt in 3 years, than Obama did AFTER 8 years.

              Trump said he’d pay off the entire dent in 8 years. Did he sucker YOU too, on that??

              Do you often go ape-shit when somebody PROVES you full of shit … on Obama’s recovery … linked to the official dates. (snort)

              Now pull YOUR head out of your ass, and tell us WHERE, in your crazed delusions, did I minimize the debt added by Bush and Obama?? Like, you’re the only one who knows about their debt???

              Go get a fucking job instead of posting here all day.

              Until THIS, I was here less than half an hour. 🙂

              1. Listen, Troll – the ACA was written by an insurance company lobbyist – who the fuck you think she was looking out for? It was doomed to fail because it was a giant gift to the insurance industry. $650+ a month for a policy with an $8,150 deductible. Garbage. And NONE of my docs are on the plan. That human garbage was lying through his teeth when he said “you can keep your doctor”, and he damn well knew it.

                Obama knew who was going to fill his pockets so he played nice with corporate America and kept waging war and spending more then we have, and making sure his corporate handlers were well taken care of. Just like his predecessor and just like this PoS.

                Picking sides between these two parties is like choosing between hippopotamus shit and rhinoceros shit.

                The Empire is crumbling, and it has been for a long time. Following the playbook history lays out to a tee, and both parties are equally complicit in our corporatocracy and demise. The problems didn’t start in January 2017…he’s just the asshole du jour. He’s just an egomaniacal piece of shit who literally doesn’t know anything about anything.

                1. The math PROVES you full of shit.

                  AND YOU AGAIN IGNORE TRUMP AS THE WORST PRESIDENT ON DEBT. EVER.

                  Picking sides between these two parties is like choosing between hippopotamus shit and rhinoceros shit.

                  WHERE DID I SAY — OR EVEN HINT — OTHERWISE.

                  LIKE ALL BRAINWASHED PUPPETS, YOU JUST INSERT MEMORIZED SLOGANS AND SOUNDBITES … AT RANDOM … NOT GIVING A SHIT IF THEY’RE RELEVANT TO THE ISSUE. THIS IS THE FOURTH TIME YOU SO BABBLED.

                  (Trumptards are NOT the only crazed conspiracy nuts. Unwitting tools of the political elites. Bellowimg blowhards

  4. But what does Paul Krugman say about our permanent trillion-dollar economic stimulus package? I seem to recall he was in favor of huge deficit spending during the Obama years after being highly critical of how Bush spent money. Interest rates are low, borrowing is a good deal right now.

    I’m no economic expert, but I’ve been told that low unemployment, low interest rates and low inflation are not supposed to coexist, just as all three being high at the same time during the Carter years was a conundrum. It’s as if the Fed and the Treasury are colluding to effectively print as much money as they can, keeping interest rates low, while all this extra money is remaining outside the domestic economy via the global demand for US dollars, keeping inflation low as well. But if, let’s say, the Chinese economy were to collapse and they stopped borrowing dollars or if OPEC were to take oil off the dollar standard and these dollars started coming home, things might turn ugly.

    1. If bad things happen, Paul Krugman will save the day with his one single twenty-trillion-dollar coin in the USA Treasury!

      https://en.wikipedia.org/wiki/Trillion-dollar_coin

      1. Paul Krugman is a useful idiot fucktard. Proof along with Obama, Gore, and Arafat that a Nobel prize is a million dollar joke.

    2. Either that, or Donald Trump will save the day, stiffing USA creditors, just like he simultaneously “stiffed” (in different ways), Stormy Daniels and the creditors of Donald Trump Real Estate Enterprises! Pretty clever, eh? Rip off the creditors of Donald Trump Real Estate Enterprises, in order to pay Himself enough to pay for Stormy Daniels flings? That’s why Trumpians voted for Trump… If Trump can rip others off for Trump’s fun romps, WHY can’t He do the SAME thing for the USA v/s our trade partners, etc.?

      https://www.nytimes.com/2016/05/07/us/politics/donald-trumps-idea-to-cut-national-debt-get-creditors-to-accept-less.html
      Donald Trump’s Idea to Cut National Debt: Get Creditors to Accept Less

      1. Well, the orange-headed imbecile’s chief skill in life IS borrowing money and then not paying it back…

    3. How STUPID are Trumptards???

      Interest rates are low, borrowing is a good deal right now.

      ONLY IF IT’S PAID OFF BEFORE INTEREST RATES RETURN TO HISTORICAL LEVELS.

      Debt has not been paid down in 75 years. NOT A PENNY.

    4. I’m no economic expert,

      Obviously …

      but I’ve been told that low unemployment, low interest rates and low inflation are not supposed to coexist,

      Umm, two of those are manipulated by the Fed, which has backed itself into a suicide corner. And WHY would interest rates be high, if there’s little or no inflation???

      The stock market began roaring BECAUSE of low interest rates, and one need not be an economist to grasp why. Investors abandoned the bond market in droves, switching to equity investments (stocks) when interest-bearing yields collapsed. .

      Now look at that in the reverse, I’ll use an extreme to illustrate the point. Interest rates CANNOT resume their historical levels without stock prices collapsing. If the Fed did that tomorrow, the market crash would be worse than 1939. Nobody knows what would happen with very small steps in the same direction, because the Fed would again announce their longer-term goals.

      just as all three being high at the same time during the Carter years was a conundrum.

      Not the educated. That, too, was the Fed. Paul Volcker did it, and it exploded in his puss. And ours.

  5. Fortunately, the Federal Reserve is monetizing the debt.

    1. “Why is monetizing the debt inflationary?
      In government, to print money in order to repay the national debt. For example, suppose a government is $1 trillion in debt. … It is not uncommon for governments monetize their debts, but because it increases the amount of money in circulation, it is considered highly inflationary.”

      (From The Google Sees and Knows All!)

      It didn’t work in Wiemar Germany, Zimbabwe, Venezuela, etc. … The USA isn’t exempt from the laws of economics. We do this for long enough and hard enough, a cup of Covfefe will set you back three billion dollars!

      1. Weimar and Zimbabwe are not good examples to bring up in discussing the risks our system faces (at least in the near-to-intermediate term). Hyperinflations like Weimar and Zimbabwe were not just about high government debt – there were other severe, exogenous events that occurred (which is also true for other cases of hyperinflations post 1900). Weimar was in bad shape – ravaged – after Germany lost WWI. The allied nations demanded war reparations that resulted in foreign denominated debt. Zimbabwe was (is still?) a highly inefficient and corrupt nation. Rampant government corruption, regime change, a collapse in production, foreign denominated debt and a collapse in their tax system were all part of their hyperinflation disaster.

        I’m not sure why so many people assume the government will need to monetize the debt. Japan’s government debt-to-GDP ratio is far, far higher than ours, and they continue to struggle with deflation (not hyperinflation).

        Having said all that, I’m not joining the MMT crowd. Ramping up more and more federal spending (and debt) to carry out more and more bad, ineffective, and anti-freedom programs is not something I want. We may one day experience a severe exogenous event (like losing a war), and I’d rather have a more stable foundation.

        1. MMT is ridiculous. It’s the worst aspects of Keynesianism on steroids.

    2. Demand at US government bond auctions has remained strong- the primary dealers have had no trouble doing their jobs. The Fed is buying bonds on the open market – the secondary market (that have already been purchased).

      If the demand for US debt dried up, we’d see interest rates much higher. For now, it’s clear that the Fed is trying to implement monetary policy (which may or may not be very effective) – it is not directly funding the Treasury. I don’t think it’s accurate to say the Fed is monetizing the debt, at least in the inflationary sense in which most people use the term.

      1. It’s a case of the dollar being the worst currency…except for all the others.

        Just the healthiest horse on its way to the glue factory.

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  7. One argument to vote democrat is that this problem will surely escalate more quickly and chaos can then ensue. Some people will flourish while the fat and comfy get wiped out.

    If that were your reasoning I’d respect that. Sadly, Reason makes no such argument, it’s somehow article after article about shitty leftist policy followed by, “both sides!”

    Keep the clown show rolling

    1. HEY DUMBASS … TRUMP HAS ALREADY ADDED AS MUCH NEW 8-YEAR DEBT (CBO 2024 FORECAST) THAN 0BAMA ADDED AFTER EIGHT YEARS … AND TRUMP PROPOSES MORE UNPAID TAX CUTS!!!

      OBAMA STARTED FROM THE 2ND WORST ECONOMY SINCE WWII.
      TRUMP STARTED WITH THE LONGEST RECOVERY EVER FOR AN INCOMING PRESIDENT … FROM OABAMA! … BUT TRUMP’S ECONOMIC AND JOBS GROWTH HAVE DECLINED FROM OBAMA’S!!!

      EVEN CRAZIER!!!

      it’s somehow article after article about shitty leftist policy followed by, “both sides!”

      TRUMP IS NOT A LEFTIST!!!!

      You’re like Bernie’s puppets. Totally ignorant … on everything … just reciting memorized slogans and soundbites, programmed by your Masters.

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  9. We need the threat of an Article 5 Convention – the specter of all-out debt repudiation – to get either of the DeRp’s serious.

    Unfortunately of course that is exactly the sort of constitutional change neither want.

    1. Umm, that can be done with an amendment … if a majority is as fucking irresponsible as you.

      1) He CANNOT deny that Trump is ALREADY the worst President on debt, EVER. And has proposed ANOTHER debt-busting, UNPAID tax cut.

      2) The “solution” is to have Trump borrow another $10 trillion …. then repudiate the debt!! JUST THAT SIMPLE!!

      Well, Trump did campaign on eliminating the entire debt in 8 years.

      Gomer ass-umes Trump meant repudiation, DESTROYING THE DOLLAR, and making it IMPOSSIBLE to finance another Trump trillion dollar deficit, the very next year.

      THIS is Trump’s core base. AND THEY VOTE 🙁

  10. Great article. Veronique with all her economics and finance training has to tell us why we see no bad effects from this, high interest rates, high inflation, declining dollar. Politicians have a hard enough time dealing with obvious problems, to get them to deal with a problem that has no obvious bad affects is almost impossible. It’s obvious that spending money you don’t have is too easy and can’t be sustainable, but where’s the rub?

    1. has to tell us why we see no bad effects from this,

      HEY GOOBER
      1) TRUMP’S ECONOMIC AND JOBS GROWTH ARE WORSE THAN OBAMA!

      2) PLUS TRUMP WAS ELECTED TO PAY OFF THE ENTIRE FEDERAL DEBT IN EIGHT YEARS … INSTEAD HE’S INCREASED 8-YEAR DEBT (CBO forecast) AS MUCH IN ONLY THREE YEARS, AS OBAMA ADDED AFTER 8 YEARS.

      With all her economics and finance training

      …. compared with a brainwashed and ignorant puppet like you!

  11. Both parties are addicted to spending. And the longer you do it, the more severe the austerity measures become that would be required to balance the budget, since interest on the debt keeps ballooning.

    Don’t worry though, Trump wants to spend more on a Space Force, and the Dems want to spending 9 zillion dollars on Medicare For All, by funding it with……..a wealth tax that most of Europe has already given up on? We have VERY good leaders.

    1. And very stupid voters, the loyal partisan ones, both left and right.

      1. Team Red! Team Blue! USA! USA! USA!

      2. Yep. The stupid ones, a shrinking minority, whose time has expired.

    2. Well, the budget will never be balanced. Eventually it will be a form of default, although, of course, they will never call it that. Not that they’re lying bags of shit or anything…

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  13. “The federal government is not a good steward of your money.”

    And in other breaking news, the sun rose this morning…

    1. So, you admit — and even sneer — that Trump has TOTALLY failed to drain the swamp.

      He was elected to pay of the entire federal debt in 8 years. Instead, he dove into the swamp, already adding more new 8-year debt (CBO 2024) than Obama added AFTER 8 years. For THIS we need Republicans?

  14. The author of this article has it all wrong. She is a French economist and although what she is saying may apply to France it does not apply to the USA.

    France is financially constrained because it no longer has a sovereign currency (the franc). It must earn or borrow the euro from other nations in order to increase its money supply. Meanwhile, the USA is NOT financially constrained. The US federal government can produce as many sovereign dollars as needed to meet its financial obligations.

    – Federal taxes DO NOT fund federal spending, they enforce the use of the currency and drain the money supply.

    – The US government can afford to buy anything that can be bought with US dollars. All that is required is congressional approval. It’s what they do ALL THE TIME.

    – A federal deficit adds money to the economy and creates a private sector surplus.

    – A federal surplus subtracts money from the economy and creates a private sector deficit.

    – The national debt is just a massive savings account denominated in US treasuries. The federal government can ALWAYS redeem your bonds for cash.

    – The USA does NOT “borrow” money from China to pay its bills. China and other nations regularly buy US treasuries so they can park their excess reserve dollars in a safe haven and earn some interest; otherwise, their reserve dollars are spent into the global marketplace or sit in a checking account at a Federal Reserve bank. The federal government can ALWAYS redeem China’s bonds for cash.

    – The buying and selling of US treasuries helps the Federal Reserve Bank of the USA regulate interest rates without a decree.

    These aren’t my opinions. If you don’t like what i just told you, you can look it up under functional finance or modern monetary theory. These are the financial facts of life and should give you confidence in the future: free healthcare, free education, strong social security, job guarantee, new infrastructure, R&D, etc.

    We’re not financially constrained, we’re politically constrained. If you really want to make America great again, get your head out of your ass and start pushing back against these deficit trolls.

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