Trillions and Trillions in Deficits

Blog Post
Tuesday, April 17, 2018

Guests on “Facing the Future” last week lamented new projections of trillion-dollar federal deficits beginning in Fiscal 2020 and discussed how recent tax and spending decisions had contributed to the problem.

“The distressing thing about the deficit situation now is that it’s large and it’s unwarranted,” said Diane Lim during the radio show’s 10th program. Lim is a principal economist at The Conference Board.

“We are at full employment, or very close to full employment,” Lim said. “We are certainly not an economy in recession. And there is no evidence that we need cuts in marginal tax rates to spur the supply side of the economy either.”

She added: “I think it’s very telling that politicians keep proposing things that have political appeal because they involve deficit-financing, and they don’t have to talk about offsetting tax increases or spending cuts.”

The new projections were released last week by the Congressional Budget Office (CBO) in its “Budget and Economic Outlook: 2018 to 2028.”

“I never thought I would see trillion-dollar deficits every year for as far as the eye can see,” said Robert L. Bixby, executive director of The Concord Coalition.

He noted on the program that the budget office “is not that optimistic about the effects of the tax cuts.” Bixby added: “The trade-off here, according to CBO’s numbers, is you get a sudden shot of adrenaline from the tax cut, and then the increased debt and drag on the economy goes back into place.”

Bixby said that although recent legislation has made matters worse, those laws were not the sole driver of the nation’s debt and deficit problems.

“I don’t look at it as ‘Do we have a spending problem or do we have a revenue problem?’ ” Bixby said. “We have a budget problem. We’re not paying for the size government that we have voted for.”

He said automatic spending programs like Social Security and Medicare were a critical concern: “They grow because there are more beneficiaries and they grow because it costs more to provide health care for those beneficiaries.”

Lim said she was concerned about the trajectory of the national debt, which is projected to grow from the equivalent of 78 percent of GDP to nearly 100 percent within a decade.  

“The task of stabilizing debt-to-GDP just keeps getting harder the more we postpone it, so it’s a bigger lift,” Lim said.

Bixby’s view: “This is just gratuitous, large debt for no particular reason other than we would like to spend what we want to spend today and send our kids the bill.”

I host “Facing the Future” each week on WKXL Concord News Radio (N.H.), which is also available via podcast.  Join us as we discuss issues relating to national fiscal policy with budget experts, industry leaders, elected officials and candidates for public office. Past broadcasts are available here. You can now subscribe to the podcast on iTunes, Google Play or through RSS.