On April 9th the nonpartisan Congressional Budget Office (CBO) published The Budget and Economic Outlook: 2018 to 2028. The annual report was a few months late this year, it usually comes out in January, but the CBO needed some extra time to make their calculations after the passage of the recent tax cuts. For supporters of the new tax laws the good news is that the report predicts the cuts will have the desired effect of growing the economy pretty significantly over the next couple years. The less good news is that after that the growth will slow and then level off.
But the really big, bad news is the CBO’s predictions about the deficit and debt. Because the tax cuts will lower government revenue, and because the Federal government just passed a $1.3 trillion spending bill, the deficit is going to increase. A lot. And if things don’t change it’s going to keep increasing. The CBO calculates that for this year the deficit will be over $800 billion, and soon it will be over $1 trillion. In order to make up the difference between the money our government is spending and what it’s collecting, money has to be borrowed. As the deficit balloons so will the national debt. According the CBO by 2028 the national debt is likely to be over $25 trillion dollars and equal almost %100 of the gross domestic product. The report’s summary explains, “That amount is far greater than the debt in any year since just after World War II.”
Soaring national debt and an out of control deficit can have a variety of negative real world consequences. If the day comes that the U.S. government has to choose between making payments on debts to China and making Social Security payments, the reality may be that China takes precedence. That situation is possible but it’s hypothetical, and the fact of the matter is so are the CBO’s predictions. The report and its conclusions are necessarily predicated on things like tax laws and government spending habits not changing, which is an impossibility. Tax laws and budget bills change all the time, usually according to which party is in power in Washington. Unfortunately, what is becoming clear, and is not hypothetical is that even with the Republicans in power the deficit and debt are not going to get reined in any real way.
The timing of the report’s release this year was significant not just because it was so much later than usual, but also because it came out just days before the House voted not to pass a Constitutional Amendment requiring a balanced budget. A similar amendment was attempted in 2011, 1995, 1986, and 1982 and failed each time so it really had no realistic chance of passing even the House this year, let alone clearing all the other hurdles to becoming an actual Constitutional amendments. While it wasn’t functional as a means of changing the law, the proposed amendment vote occurring right after the CBO report release did serve to illustrate the difficulty of balancing some of the Republican Party’s main priorities, such as fiscal responsibility vs. high levels of military spending and large tax cuts. It also shows which of those priorities the Republican Party has actually chosen.
After voting against the amendment Senator Bob Corker (R-Tenn) said to the Washington Post “What a joke. What a joke. It is the biggest joke in the world. It’s a way for people to hide behind making tough decisions. I’m for a balanced-budget amendment, but the way it’s drafted, it’s just to give people cover. We’ve got the House, the Senate and the presidency. If we wanted to figure out a way to balance the budget we could do it.” If it is a joke then the punch line is, the party that’s supposed to be in favor of fiscal responsibility just put the U.S. on a path that leads to a national debt equal to almost 100% of the GDP. To put that another way, the U.S. currently has no major party that functionally supports fiscal responsibility, and that’s not really funny.