Earlier this week we explained that the real national debt is $94.6 trillion with most of it attributable to Congress spending the Social Security and Medicare "trust funds" on
everything from Amtrak, to foreign aid, to the war in Iraq. There is no “trust fund.” That vault is empty, or rather filled with IOUs to be paid by future taxpayers.
Now, the Congressional Budget Office has released a report indicating that America’s fiscal situation is about to get a whole lot worse.
The U.S. hit the $31.4 trillion statutory limit on the national debt in January, forcing the Treasury to start taking what it calls extraordinary measures to make all of its payments in full and on time. The so-called X-date — the day on which those extraordinary measures are exhausted and the federal government can no longer meet all of its obligations — will arrive at some point in the fourth quarter of the current fiscal year, according to the new estimate, but the CBO did not provide a specific day, reported Yuval Rosenberg and Michael Rainey in an article for The Fiscal Times.
According to reporting by Jim Tankersley and Alan Rappeport of The New York Times, the United States is on track to add nearly $19 trillion to its national debt over the next decade, $3 trillion more than previously forecast, the result of rising costs for interest payments, veterans’ health care, retiree benefits and the military, the Congressional Budget Office said on Wednesday.
The new forecasts project a $1.4 trillion gap this year between what the government spends and what it takes in from tax revenues. Over the following 10 years, deficits will average $2 trillion annually as tax receipts fail to keep pace with the rising costs of Social Security and Medicare benefits for retiring baby boomers.
To put those numbers in context, the total amount of debt held by the public will equal the total annual output of the U.S. economy in 2024, rising to 118 percent of the economy by 2033.
Tankersley and Rappeport report the CBO now projects that the U.S. economy will barely grow this year, after adjusting for inflation, and that the unemployment rate will rise above 5 percent, before growth re-accelerates next year. It attributes the slowdown in growth to the Federal Reserve’s campaign to tame inflation by raising interest rates, which is aimed at cooling the economy and the labor market.
The new CBO numbers add an important point on the conservative side of the ledger as the debate between President Biden and Republicans over taxes, spending and the nation’s debt limit heats up.
Conservative Republican House members have said they refuse to raise the debt limit unless President Biden agrees to major spending cuts. Biden has repeatedly said that he will not negotiate over raising the debt limit – setting the stage for a major political battle over the summer.
The budget office said in a separate report on Wednesday that such a crisis could occur as soon as July — and possibly even earlier — if lawmakers do not agree to raise the $31.4 trillion limit, which the government technically hit last month, reported Tankersley and Rappeport.
And this isn’t a year-end fake “government by crisis” situation. Rosenberg and Rainey report federal finances are deteriorating more rapidly than expected, the Congressional Budget Office said Wednesday as it released its 10-year outlook for the federal budget and the U.S. economy.
The 101-page report finds that the gap between spending and revenues is growing faster than previously estimated, thanks in part to new legislation, with the 2023 deficit projected to come in at $1.4 trillion, rising to $2.7 trillion in 2033. The cumulative deficit is now projected to total $18.8 trillion over the next 10 years, which is $3 trillion more than the CBO projected just last spring.
Measured as a percentage of the economy, the deficit will equal 5.3% of gross domestic product in 2023, a number that will bounce higher over the next decade, reaching 6.9% in 2033 — a level of deficit spending that has been seen only five times since the end of World War II, CBO said.
Economists have long held that public debt of more than 90% of GDP is a red line that should not be crossed. Right now, debt held by the public is projected to rise from the current 98% of GDP to 118% of GDP by 2033 — an increase of roughly two percentage points a year, and reaching the highest level ever recorded. Assuming no changes are made to the current trajectory, that number will keep rising, hitting 195% of GDP in 2053.
“Over the long term, our projections suggest changes in fiscal policy must be made,” CBO Director Phillip Swagel told reporters. “The fiscal trajectory is unsustainable. Our spending is outpacing our revenue. At some point, something has to give.”
All of this puts us in mind of the 2011 – 2012 Greek debt crisis (Greek debt-to-GDP ratio reached an all-time high of 209.5 % in Mar 2021 and a record low of 93.7 % in Sep 2003) where the price of a bailout by the International Monetary Fund was severe restrictions on Greek sovereignty and the forced sell-off of assets by the Greek state. Unfortunately, even that harsh solution to America’s spending and debt crisis is not available – our debt is too large for anyone else to bail us out and the only solution is to stop spending.
The Capitol Switchboard is (202) 224-3121 we urge CHQ readers and friends to call their Representative and Senators to tell them it is past time to cut spending and to pursue a real solution to the disastrous advance of the federal debt that threatens to destroy our economy and overwhelm our government’s ability to defend the nation and deliver services to its citizens.
Real National Debt
Congressional Budget Office report
Joe Biden administration
social securtiy trust fund
Marginal tax rates