in a twitter thread. ( I can only copy the text, but each comment is backed by data in charts you should see)
https://twitter.com/Brian_Riedl/status/1626032975790895105?s=20
Chartstorm. Today, CBO released its first budget baseline in 9 months. Washington's fiscal situation has significantly deteriorated, and should serve as a wake up call. Deficits will approach $3 trillion within a decade even assuming the 2017 tax cuts
expire as scheduled. (1/9)
Overall, the debt held by the public is projected by CBO to hit 118% of GDP within a decade - surpassing World War II's peak. Again, this assumes peace, prosperity, low interest rates, and the 2017 tax cuts expiring on schedule. It will likely go higher.
The rising deficit is driven by rising spending. The projected level of 25.3% of GDP was exceeded only during World War II and the pandemic. Revenues are expected to remain above average (although may dip 1% of GDP if TCJA is extended).
President Biden likes to take credit for reducing the deficit. Yet the projected 2021-2031 deficit has jumped by $6 trillion since his inauguration - driven by expensive legislation plus rising inflation and interest rates.
The rising deficit is driven by the escalating Social Security and Medicare shortfalls that must be paid out of general revenues - rising from $426 billion to $2 trillion annually. Significant deficit reduction must address these shortfalls.
Tax revenues are not the near-term problem - they have jumped by $1 trillion (adjusted for inflation) since 2019. At 19.6% of GDP, they are near record levels, and expected to settle in around 18% of GDP.
The spending story remains dominated by Social Security, health care, and interest on the debt. It is impossible to significantly rein in spending without addressing those core drivers.
Interest costs are surging well past $1 trillion (even adjusted for inflation). The projected 3.6% of GDP spent on interest will shatter previous records - and even that optimistically assumes interest rates top out at just 3.2%.
ScottW
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