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Trillion-Dollar Deficits Are Back and Here to Stay

The Congressional Budget Office is about to release a report. Spoiler alert: It won't be pretty.

Budget-watchers have been predicting the return of trillion-dollar deficits for months. That forecast will likely become offical—or as official as these things can ever be—later this week, when the Congressional Budget Office (CBO) releases its annual outlook for revenue and spending.

The 2018 Budget and Economic Outlook will be the CBO's first major assessment of the federal government's fiscal trajectory since December's sweeping tax bill and February's two-year budget deal, which shattered spending caps and boosted federal outlays by more than $400 billion. Either of those developments would have been likely to increase future deficits, but together they'll be like adding cocaine to your morning coffee. Even under the sunniest set of assumptions, the tax bill will add between $1 trillion and $1.5 trillion to the deficit over the next decade; the spending plan tacked on another $320 billion.

That means trillion-dollar deficits are the "new normal," says Stan Collender, author of The Guide to the Federal Budget, in a new column at Forbes. It fact, the deficit is likely to push well above the $1 trillion in future years.

Because the CBO can only make projections based on current law, its outlook will include the phase-out of some tax cuts in the middle of the next decade. That means the CBO will be forecasting higher revenue levels near the end of its 10-year forecast, even though it's politically unlikely that those phaseouts will be allowed to occur, Collender explains.

For much of the same reason, other independent analysts, such as the Committee for a Responsible Federal Budget, are already saying the deficit could push toward (or even past) the $2 trillion threshold by the end of the 2020s.

Committee for a Responsible Federal BudgetCommittee for a Responsible Federal Budget

President Donald Trump and congressional Republicans are likely to use a well-worn page of their playbook to remind everyone that trillion-dollar deficits happened under Barack Obama too. This is true, of course, but there key differences between the years 2008–2012 and today. Those four years of trillion-dollar deficits happened during and immediately after the so-called Great Recession, which cratered tax revenues and saw increased government spending on a variety of mostly ill-conceived and generally wasteful efforts to stimulate the economy or bail out certain industries.

Today, unemployment is less than 4 percent and the economy has been humming along with hardly a hiccup for several consecutive years. Government coffers should be full to the brim, or at least they shouldn't be running dry.

It's also true that the White House's official budget projects a mere $363 billion deficit in 2028. But getting to that level requires Congress to enact more than $1 trillion in spending cuts over the next decade—something that seems well beyond the realm of fantasy and nearing the border of complete political impossibility. While some members of Congress care about reducing deficits, it is now clear that the Republican majority in both chambers and the Republican in the White House have little interest in being responsible stewards of the federal purse. And the Democrats aren't exactly offering a fiscally responsible alternative.

Keep in mind that all these projections include the underlying assumption that the economy will continue to grow for the next decade. What happens if there's another recession?

"If the economic outlook doesn't turn out to be as rosy as the White House is promising, the very high Trump era federal budget deficits will be even higher," says Collender.

Within a few years, we might be wishing for the return of merely trillion-dollar deficits.

Photo Credit: John Greim/Newscom

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  • DajjaI||

    Yup. This is the real threat to the youth, not berzerk autistic kids showing off their gun handling skillz. *This* is what they should be out on the streets protesting against. But they are just stooges for their elders, who are far more worried about who will pay for their housing so they don't have to live with the little brats.

  • Citizen X - #6||

    So. Zimbabwe with nukes it is, then.

  • Just Say'n||

    Until we invade Zimbabwe for lolz

  • This Machine Chips Fascists||

    More like Rome with nukes.

  • Just Say'n||

    That would have been historically bad ass. Eat shit Carthage

  • This Machine Chips Fascists||

    It would have given a few caliphates something to think about.

  • MatthewSlyfield||

    Maybe, depends on which Cesar they developed nukes under. Caligula with nukes would not

  • Just Say'n||

    "Even under the sunniest set of assumptions, the tax bill will add between $1 trillion and $1.5 trillion to the deficit over the next decade"

    If tax reductions have no positive economic benefits, which is what the CBO suggests, then they should be balanced against expenditure reductions, right? So then how can anyone argue that reduced tariffs should not be balanced against expenditure reductions? Trump raising tariffs would seem to be fiscally sound, if we are going to accept the CBO's predictions, no?

  • NotAnotherSkippy||

    You've been paying attention. But there are some tax cuts so important that they're worth any price.

  • Francisco d'Anconia||

    Fuck you, cut spending!

  • BigChiefWahoo||

    That's the whole problem in practice: You can't buy votes with balanced budgets.

  • Francisco d'Anconia||

    Single-term limit for all elected officials

  • Alan Vanneman||

    "Today, unemployment is less than 4 percent and the economy has been humming along with hardly a hiccup for several consecutive years."

    Gee, I wonder if "increased government spending on a variety of mostly ill-conceived and generally wasteful efforts to stimulate the economy or bail out certain industries" had anything to do with that. Us devoted Reason readers remember how Reason GOT IT WRONG FOR EIGHT FUCKING YEARS WHILE PRESIDENT OBAMA SAVED THE ECONOMY. The Koch bros were worth $20 billion apiece in 2008 and now they're worth $40 billion apiece, and this is the thanks we Democrats get. It would be nice if the folks at Reason would grow a pair in the appropriate places and admit they got it totally fucking wrong.

  • Just Say'n||

    And here I thought that my comment suggesting that tariff reductions be offset by expenditure reductions was going to be the craziest thing said on this thread.

    Congrats on your insanity. Stay ever vigilant of those evil diabolical Kochs

  • Just Say'n||

    CC: open borders liberal-tarian

    Do better with your parody. Study this guy's comment

  • jerbigge||

    Tariffs will raise the deficit. Lower incomes for everyone who exports stuff to China because China is now putting tariffs on everything we export to them. Consumer prices will go up due to raw material costs will be higher. If the auto manufacturers have to pay more for steel, then the price to the consumer will go up. Overall, tariffs are a "negative benefit" than a "gain".

  • Citizen X - #6||

    BEST K*CHS EVAH!

  • Just Say'n||

    Do you pronounce it "cocks" or "cokes"? I personally think it should be pronounced "cotch" like Mayor Kochs

  • Citizen X - #6||

    For professional reasons i happen to know that "Koch" rhymes with the soft drink.

  • Just Say'n||

    And I'm saying that they're pronouncing their own last name wrong. Should be "cotch".

  • Jerryskids||

    It's pronounced "boo-kay".

  • This Machine Chips Fascists||

    So, has the takedown of backpage hit your "profession" as hard as they say?

  • Citizen X - #6||

    I work in a law firm. All major disruptive changes to the law are good for business.

  • StackOfCoins||

    Whatever happened to Reason pointing out that unemployment is low because of the way unemployment figures are calculated; that the vast majority of unemployed people have been out of a job for years and are no longer tallied?

  • loveconstitution1789||

    Whenever the US gets into negative unemployment numbers, that truth will be impossible for politicians to ignore.

  • Old Smokin' Egg||

    "The Koch brothers were worth $20 billion apiece in 2008 and now they're worth $40 billion apiece..."

    A little algebra reveals that a nominal rate of return of 7.2% will double one's money in 10 years. For what it's worth, most pension systems assume a return of ca. 10%, which is consistent with the 100-year historical average for stocks.

    But let's suppose that les frères Koch had put their money in an index fund ten years ago, then been marooned on a desert island from which they couldn't lobby or bribe or propagandize. On April 8, 2008, the S closed at 1365.54. At this writing, on April 9, 2018, it's at 2647.12; so it's grown by a factor of 1.94. Moreover, our alternate-history Kochs would've received dividends during those 10 years, and reinvested dividends don't show up in the S. It seems likely that any chump who invested in such an index fund would've seen their money double in that time.

  • Old Smokin' Egg||

    Sorry—Reason's software apparently can't handle ampersands. In my second paragraph, there're two lone capital-S's, which were meant to be "S(ampersand)P500".

  • chemjeff radical individualist||

    So what exactly *is* the gameplan for paying back all this debt? Some magic voodoo International Finance/Fiat Money Trick that will somehow get rid of $20 trillion of indebtedness?

  • Citizen X - #6||

    There is no gameplan beyond kicking the can as hard and as far as will allow the current batch of players to keep their jobs.

  • Just Say'n||

    Default- "the two greatest words in the English language"

  • chemjeff radical individualist||

    That's what I'm afraid of.

  • This Machine Chips Fascists||

    Don't you know? Deficits don't matter. And anyway, The Sovereign can't go bankrupt. That never, and I mean never, happens. Also, if The President does it, it is not illegal. Truth.

  • Francisco d'Anconia||

    Inflation

  • NotAnotherSkippy||

    Won't work because the reason for the deficits is entitlement spending, which is indexed for inflation.

    But all of this is just more fiscal convenience for reason. If they really cared we would be seeing pieces constantly on entitlement spending. We don't.

  • Cynical Asshole||

    If they really cared we would be seeing pieces constantly on entitlement spending. We don't.

    Exactly. Not a single word, on entitlement reform.

  • NotAnotherSkippy||

    So an annual(ish) note about how entitlememts are a problem works for you? You have a mighty strange understanding of the word "constantly." Hint: it's a lot more than "not a single word." But thanks for playing.

  • JWatts||

    "So what exactly *is* the gameplan for paying back all this debt? "

    Inflation

  • Cynical Asshole||

    If they were smart the feds would sell off some of the land they own in the western US. I forget the exact figure, but they own far more than $20 trillion worth of land that could be sold to private interests.

    But they're not smart, so instead they'll probably go with a combination of creating more money (inflation), massive tax increases (which each party will blame on the other) and as a last resort default.

  • NotAnotherSkippy||

    I'm sure they could get the full 20TT. And libertarians are supposed to be the smart ones.

  • Old Smokin' Egg||

    Bad idea. Federal land ownership probably doesn't make a significant difference to the structural deficit: the difference between the income derived from it and the expenditures necessary to maintain it is probably on the order of 10 billion dollars or less. Thus selling off federal lands probably wouldn't produce any kind of serious long-term reduction in expenses.

    It'd be the height of naivete to believe that the proceeds from land sales would go for deficit reduction. Blue legislators would push for the cash to be spent on expanded social programs; red legislators would plump for tax cuts; and both sides of the aisle would seize upon the new income as a reason to put off stabilizing Social Security and Medicare.

    While we were busy selling off those lands, the deficit would be every bit as bad as it currently is. In a decade or two, when we ran out of land to sell, we'd have a hatful of new social programs that couldn't be cut, and tax reductions that couldn't be reversed. We'd only wind up with a bigger deficit than ever.

  • Charles Barr||

    Another alternative: STOP ISSUING DEBT!!! The debt and the deficit are TWO SEPARATE ISSUES! "Unbacked" fiat money is much less destructive to the economy and to personal liberty than the "debt-backed" fiat money we use today. We urgently need to transition to a debt-free currency before the national debt overwhelms the economy. See www.fixourmoney.com .

  • tommhan||

    Like they would actually spend it on the debt. I will believe it when I actually see it happen.

  • Weigel's Cock Ring||

    Contrary to what the Buttplugian Block Yomommatards at Reason want people to believe, the trillion dollar deficits never actually went away. The national debt increased $9.3 trillion in the eight years of their most beloved Obammesiah, the Negro Nixon. Elementary fourth grade level math clearly shows that to be more than a trillion dollars a year. In fact, it was a trillion a year even if you choose to country only the publicly held portion of the debt!

  • Calidissident||

    The deficit is counted on an annual basis, not averaged over an 8 year term. Thus it is possible for an 8 year average to exceed $1 trillion while some years within that range are below $1 trillion. This is also elementary level math. If you go to the treasurydirect site and search from/to fiscal year-end dates, the increase was not $1 trillion for every year. Most, yes, not all. If you seriously think Reason are "Block Yomommatards" then what word should be used to describe your adulation of Trump that far exceeds any positive views ever held of Obama by Reason?

  • Cynical Asshole||

    Apparently there's some parallel universe where for 8 years reason never wrote a single article or blog post criticizing Obama. Apparently some people have figured out how to travel between that universe and ours, kind of like in The Man in the High Castle.

  • damikesc||

    More depressing: Those figures are unrealistically low.

    The deficits will be way, way worse than that.

  • ||

    I'm commenting on Hit & Run in order to buy sex.

    Anybody got a problem with that? I'm asking you, FOSTA/SESTA!

  • NotAnotherSkippy||

    2008-2012 also had fewer retired boomers. I wonder, why did eric forget that little point?

  • Calidissident||

    It could be because the marginal difference in added SS and Medicare spending from new retirees today versus 2008-2012 on the deficit is relatively small compared to the impact of reduced revenue and increased spending during and after the recession.

    Or it could be because Eric loves Obama, even though he describes Obama's spending as "a variety of mostly ill-conceived and generally wasteful efforts to stimulate the economy or bail out certain industries." Totally sounds like the words of a "Block Yommomatard" to borrow the phrasing of our friend Weigel's Cock Ring. It's not like he was attacked for that very sentence in this thread by an actual Obama fan.

  • NotAnotherSkippy||

    Social security spending in 2012: 773BB
    SS spending in 2018: 945BB

    Is there a reason you didn't include any numbers in your reply? Yes, yes there is.

  • SunkCost||

    It's covered by the current law base line in the chart above. Rep. and Trump own the red pieces. The everyone's culpable for the yellow BBA.

  • Rich||

    What happens if there's another recession?

    *** scratches head ***

    Another war?

  • Iheartskeet||

    Golly, if only there was a widespread, grassroots movement focused on spending and deficits, even though the participants disagree on lots of other stuff. You know, where people marched by the thousands and got some good people elected.

    Oh yeah, we had one. The Tea Party.

    But, fuck those guys, because some people in the movement are against abortion and want to build a wall. Not pure enough libertarians.

  • marshaul||

    some people in the movement are against abortion and want to build a wall

    To be fair, a government which wastes money of this sort of crap should be permitted to drive itself bankrupt. Let's call it "political Darwinism".

  • ||

    "The tax cuts will pay for themselves." Laffer was wrong in 1981, and nothing has changed since then.

    Both major political parties are culpable in this BS.

  • jonnysage||

    They dont have to pay for themselves. They dont cost anything.

  • jonnysage||

    Dems will obsess over the red (not taking your money), and ignore the blue (70 years of out of control social spending).

  • marshaul||

    Whereas Repubs are actually totally different. For real.

  • jonnysage||

    Sure, theyll ignore the yellow and the blue and probably add some more yellow.

  • TxJack 112||

    When a single unelected Federal judge can overturn and change laws passed by elected representatives you have a problem. When courts are used to forward policies and changes to laws instead of the legislative process, there is a problem. When people can get elected to Congress and remain there for decades and pass laws only benefitting a few at the expense of the many, you have a problem. When media is no longer the watchdog of government but the advocate for one point of view, you have a problem. Unless the American people demand amendments to the Constitution for term limits on Congress and judges, a balanced budget and the reestablishment of states rights over Federal authority, this country cannot survive. Congress was always supposed to defer to the states, not dictate to them. After the Civil war, this began to change and in the 1930s during the great depression, we let the very government we were never supposed to have rise and take power. That government is why the Founders wrote the Constitution and made such a clear separation of powers which has been lost. Every time there is a fight on any issue, the people do not look to the Congress to find a solution, they look to the courts who have become super-legislators. The most important changes in this country, good and bad, in the past 75 years have been a result of court decision, not legislation.

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