Trillion dollar deficits could be the new normal
Federal budget policy is a disaster. The government will spend $4.6 trillion this year, raise $3.6 trillion in tax revenues, and fill the gap with $1 trillion in fresh borrowing. That is like a worker earning $36,000 in income but spending $46,000 and putting $10,000 on credit cards. Maybe he can get away with the excess spending for a while, but eventually his finances will crash.
The CBO’s baseline projections show spending rising faster than revenues in coming years, with the result that annual deficits by 2030 are expected to hit $1.74 trillion. Spending in 2030 at $7.49 trillion will be 30 percent higher than revenues of $5.75 trillion...
That's not to say this is exactly how things will occur over the next ten years. The CBO has issued a rather optimistic scenario for spending and debt. The real numbers could be even worse:
Under the more likely scenario, the annual deficit by 2030 will be $2.37 trillion, up from $1.74 trillion under the CBO baseline. The more likely scenario has spending in 2030 at $7.79 trillion, which will be 44 percent higher than revenues that year of $5.42 trillion.
Our economy is growing and we are at peace, so federal deficits and debt should be falling. But deficits are soaring and debt is at record high levels for peacetime as a share of the economy. The outlook is particularly scary because neither party is even talking about spending reforms. We are marching into a fiscal crisis and our elected leaders seem to have no idea how to tackle it and do not even seem to care.
The not seeming to care charge is on the mark. Debt doesn't matter to the political class -- or to many voters, either. The billls come due in the future, to be paid by someone else.