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February 9, 2024 - 5:30pm
The title of the Congressional Budget Office’s annual “Budget and Economic Outlook” may sound boring, but this document makes for horrifying reading. The latest edition of the report projects staggering numbers over the next decade, estimating that the federal deficit will swell from almost $1.7 trillion in 2023 to over $2.5 trillion in 2034.
This headline figure barely scratches the surface. Analysts have long warned about the pressure social security entitlements would put on the rest of the federal budget over the long term. On top of that, interest payments on the national debt are expected to cost $1 trillion more a decade from now, which means that by 2034, the US is projected to spend $600 billion more on servicing its debt than on national defence.
This budgetary trajectory has major geopolitical stakes. The CBO projects that defence spending as a percentage of the economy will shrink over the next decade from 3% to 2.5% of GDP. Thus, these massive deficits already assume a de facto cut in American defence spending relative to the national economy. As current events show, future foreign policy crises could further test those fiscal resources. By many estimates, the United States has already spent close to $75 billion in aid sent to Ukraine, and the Senate just advanced a bill that would appropriate $95 billion in additional military assistance to Ukraine, Israel, and Taiwan.
These commitments invariably put the CBO’s projections on defence spending at odds with the White House. In fact, the last time that the US spent under 3% of its GDP on defence for any sustained period was before World War II. That level of spending would make much more brittle the web of security commitments that the United States has built over the past eight decades. At some point, Joe Biden will be forced to choose between winding down some of these commitments, changing his domestic-spending agenda, and putting a bigger hole in the deficit.
Adding to this geopolitical pressure is that borrowing to pay for more defence spending over the CBO’s estimates could weaken the US security posture over the long term. Every dollar borrowed now adds to the interest payments due later, which in turn crowds out defence spending in the future. Fiscal profligacy has long-term national security implications.
Despite the scope of these fiscal challenges, the presidential election has avoided mentioning them so far. Sky-high deficits are a pillar of “Bidenomics” (the White House’s own budget projects deficits of close to 5% of GDP indefinitely) and an essential element of Biden’s election pitch. This is in spite of the fact that, historically, the US has only had that magnitude of sustained deficit spending during an economic crisis or a world war. By Barack Obama’s second term, the deficit bobbed around 3% of GDP, so Biden has definitely pushed the budgetary envelope relative to his Democratic predecessor.
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SubscribeIf I’ve learned anything from watching the first two-thirds of the MC Hammer Behind the Music, it’s that the money never runs out.
Didn’t the Trump rather push the US deficit into orbit with his tax cuts for the wealthy?
We won’t get fiscal sanity from Trump either.
Not so sure about that. If Trump gets re-elected he’s only in for one term. He could do some interesting things since he’s not beholden to corporate interests.
Thanks for the laugh.
The last time the debt decreased was 2001. 4 presidents are responsible, as are the voters who seemed to stop caring and embrace unlimited spending. We haven’t had a true fiscal conservative in a long time.
I understand progressives need rhetorical scapegoats to breathe but “Tax cuts for the wealthy” is a propaganda phrase. Everyone working with the exception of one group got a tax cut from Trump. The only people that didn’t get a tax cut were rich people in blue states that could no longer claim their Blue State’s excessive State and Local Taxes (SALT) on a federal tax form.
So you see, Trump actually did collect plenty of new revenue from “the rich.”
Hold on, if everyone working got a tax cut, except for a few as specified who I assume didn’t overall pay very much more if at all, where was this ‘plenty of new revenue’? You also imply that whatever these changes were in tax deductions only applied in some, presumably ‘blue’ meaning Democrat controlled, states, which is strange.
Bidenomics creates 3% inflation and 3.5% growth from 5% deficits. Sounds like a bad deal to me.
If you add those up, you get 11.5%. Now, I’m not sure what that 11.5% represents, but it’s 11.5% more of whatever it is than Trump is responsible for; surely Biden’s team can get a campaign ad out of that, can’t they?
“Biden: He gave us the 11.5%!”
I dont thik we get to 2034 in the current system. 2028 i think the wheels come off. America defaults or hyperinflates. They aint paying anyone really after that
Every empire ends with hyperinflation of the currency due to excessive borrowing . Looks like it will be no different now. But the music is still playing. Go out and enjoy it
‘Enjoy yourself, enjoy yourself its later than you think’
How does this compare with Putin’s Russia ?
Do these figures include the financial effect of a war with Russia and China?
The origin vision of the USA was a minimalist federal government. Not 3 million federal workers.
Nor millions and millions of illegal aliens leaching off the system…
Where does the 34 trillion fit in then ? (ref: articles by Victor Davis Hanson )
That’s the US national debt, now increasing at upwards of $2 trillion p.a. (and not including $100 trillion of unfunded social security liabilities).
Don’t forget the offsetting $100 trillion of tax receipts against the $3,000 trillion of unreported future GDP.
Bidenomics, MMT and other manifestations of financial illiteracy. Don’t be holding the parcel when the music stops. The chickens are circling the roost.
The chickens are hanging in the window of a corner shop in Beijing, and now the turkeys are roosting in the GOP.
“May risk a geopolitical reckoning” ? You’re at least two decades late with that observation, buddy. You might want to circle back to Reaganomics to get a sense of how you got yourself into this mess.