Dire warnings about the deficit. Is anyone listening?
Recent Congressional Budget Office projections about the federal deficit drew nary a sound from most politicians in Washington, no surprise since both parties have had a hand in driving the numbers through the roof. Yet ignoring the CBO’s warning would be foolhardy.
The CBO says it expects the deficit will average $1.3 trillion per year through the next decade, “under the assumption that existing laws governing taxes and spending generally remain unchanged.” It projected federal debt held by the public to grow from 79% of gross domestic product in 2019 to 98% of GDP by 2030. It could be 180% of GDP by 2050.
And reality could prove to be much worse. Anthony Davies, an economics professor at Duquesne University, and James Harrigan with the Center for Philosophy of Freedom at the University of Arizona, note that the CBO “typically over-predicts revenues and under-predicts spending in each year leading up to that 10th year.”
“Add up all those ‘rosy in both directions’ errors, and the CBO ends up with deficit projections that are much rosier than reality,” Davies and Harrigan wrote for InsideSources.com.
Sen. James Lankford, R-Oklahoma City, whose office publishes an annual account of questionable government spending, said the U.S. Treasury is receiving record amounts of tax revenue but spending continues to grow. The deficit, Lankford said, “is not something that we can continue to say that we will address ‘someday.’”
He’s right, but Congress remains disinterested. In particular, both parties and President Trump refuse to consider needed reforms to Social Security and Medicare because they are such political hot potatoes.
Someone needs to grab the oven mitts, though, as Manhattan Institute senior fellow Brian Riedl makes clear in a recent essay. Riedl, an economist, notes that the yearly shortfall for Social Security and Medicare, $440 billion last year, is projected to reach $1.869 trillion by 2030 — a $1.4 trillion cost increase.
The Trump tax cuts of 2017, a favorite target of progressives whenever the deficit is discussed, cost about $250 billion per year. Another favorite, defense spending, is projected to rise by about $250 billion by 2030. “Those costs will be dwarfed by Social Security and Medicare shortfalls that rise by $1.4 trillion through 2030,” Riedl writes.
Davies and Harrigan say that as the debt rises, annual interest on it will rise from eating up 18% of tax revenues today to nearly one-third by 2029. Ever more spending will require more taxes to cover interest on the debt. The result, ultimately, “is something anyone can predict: insolvency.”
Riedl sounds a similar alarm. He says defensiveness over the 2017 tax cuts keeps Republicans from discussing the deficit, while Democratic presidential candidates promise tens of trillions in additional spending in the years ahead. This “conspiracy of silence” he says, “will ultimately cost taxpayers and retires dearly.” Is anyone listening?