Rosy Look of the Ballooning Deficit

Thanks to tax cuts and spending increases, US deficit estimates are spiraling up. Let's investigate some estimates.

Bipartisan Deal Makes Shows Republican Hypocrisy

The deficit projection chart is from the New York Times article Budget Deficits Are Projected to Balloon Under the Bipartisan Spending Deal

Spending Projections

$716 billion dollars a year for "defense" is absurd.

US drone policy, dropping bombs indiscriminately, and never ending wars are all extremely counterproductive.

Republicans are only interested in spending cutbacks when they do not control the White House.

Compromise is as it always was: reckless spending by both parties.

Big Government is Back

Big government is officially back in style. Republicans propelled themselves to power in Washington by promising an end to fiscal recklessness. They are now embracing the kind of free spending and budget deficits they once claimed to loathe.

On Friday, Congress passed a bipartisan spending deal that blows through the caps imposed by the 2011 Budget Control Act, unlocking $300 billion in additional spending for the military and domestic programs over the next two years. That comes on top of last year’s $1.5 trillion tax cut package and as the White House prepares to unveil on Monday a $1.5 trillion infrastructure plan that would require $200 billion in government funding.

While the White House says it plans to offset that $200 billion through unspecified cuts, none of the other spending is paid for at a time when the nation’s debt already tops $20 trillion.

“With this deal, we will experience trillion-dollar deficits permanently,” said Andy Roth, vice president of the conservative Club for Growth. “That sort of behavior, the last time I checked, is not in the Republican platform.”

“I think it’s a little bit surprising and puzzling,” said Jason Furman, a former chairman of Mr. Obama’s Council of Economic Advisers, noting that trillion-dollar budget deficits is uncharted territory during a period of full employment. “We’ve never had anything like that outside of a war or a recession.”

Rosy Look

I promised a "rosy look" at this grim pictured. Here it is:

The nonpartisan Committee for a Responsible Federal Budget projects that the United States will run $2 trillion annual budget deficits by 2027 and have a debt-to-gross domestic product ratio of 105 percent — a level not seen since the end of World War II.

That rosy look assumes no recession, no additional spending "compromises", no infrastructure spending impact, and $200 billion in unspecified cuts that will never happen or will be quickly unagreed to.

With those rose colored glasses on, deficits will run "only" $1.2 to $1.5 trillion, increasing to $2 trillion by 2027.

That should have been $716 not $761 in my Tweet.

Reader Dave, a friend, pinged me with his comments on the above stories. "The deficits right after the 2008 financial crisis were a combination of safety net spending and countercyclical spending. I think that the addition to national debt will be at the upper end of the estimates (close to $3 trillion) rather than the commonly cited figure of $1.5 trillion."

I agree, but add this caveat: Both of us may be quite a bit optimistic.

Mike "Mish" Shedlock

Comments
No. 1-20
clovisdad
clovisdad

Politicians get re elected, and receive campaign "contributions" by providing free lunches and other peoples' money to supplicants. That's how they stay in office. There is no way to fix this without single terms and federally funded (exclusively) campaign funds.

Stuki
Stuki

@Carl_R
Your second option, populists, is the only realistic option in the US. At least for some time. A/The/Some specific populists may be from the military, as is common in in South America, but the distance between the military and politics is too great in the US for a straight up Coup to take place. Most of the military, officers even, are not from the prime leeching classes, for one. In America, rich dilettantes become lawyers, banksters, “investors” and “asset owners” aka Federal Reserve welfare recipients. Not officers (thank goodness, considering the quality and quantity of kit our military possesses….)

Overran by Mexico is also some ways off, paranoid Trump fans notwithstanding. Ditto moose mounted mulletarian hordes swinging hockey sticks while drunk on Molson…. Now, over time; unless things change A LOT, Latin America will prove fertile ground for so called “radical” Islam. Just like Africa is. Simply because the Latins are about a generation ahead of “us” in experiencing the inevitable failure of progressivism. Sharia may in some respects kinda suck compared to Jefferson’s vision of America the Free. But compared to being simple chattel slaves for a bunch of Banksters and other incompetents making up arbitrary “laws” by the hundreds of thousands of pages a year solely for their own benefit; having a proper, justifiable and somewhat verifiable by all, law, regardless of specifics, is quite the blessing. And then, the Islamists will spread north. Just as Latin criminality currently, and to and accelerating degree, is doing.

But until then, the upside is a populist promising default doesn’t really have to win outright. All he needs to do, is get close enough to put some fear into creditors. Enough so that rates increase markedly. Thus, making funding deficits/accumulated debt tougher. Which will mean the average guy will feel the burden of paying interest etc. more directly. Which will further increase the appeal of “default populists.” And so on, and so on, in a virtuous circle, until, one day, the whole rotten charade comes tumbling down. No doubt with the scum, and their various sycophantic useful idiots, turning on each other, each blaming the other guy. Instead of realizing that it is the whole “system” itself that is a failure. And noone having any faith in it, is any more than a self-serving and/or clueless dunce.

Ambrose_Bierce
Ambrose_Bierce

Heres my new tax plan, end the secret ballot. You vote for A and A signs a budget which adds to the deficit X dollars, X dollars divided by the number of A voters, will get that share as their tax bill. If you voted for B you get a flier.

RonJ
RonJ

Stuki: "As I like to point out; the only way to rein in spending, is for the populace to grow up, wake up and, en masse, support a candidate that promises to flat out just flip creditors the bird, show them some nukes, and tell them to go stuff it." In other words, it isn't going to happen.

Realist
Realist

Good insights by many. Very complex problem. No easy solutions. One way to look at it is that today’s Americans are benefiting at the expense of their grandchildren. I’m not sure how it plays out exactly, other than that the bottom 90% will suffer the most. It’s too bad that the US social security system wasn’t invested like many of the pension systems in other countries. Then at least the pensioners would be partly protected.

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