When the Congressional Budget Office released its Budget and Economic Outlook yesterday, almost everyone in Washington foolishly fixated on the estimate of $1 trillion-plus annual deficits.
What’s far more important – and much more worrisome – is that the burden of government spending is projected to relentlessly increase, violating the Golden Rule of fiscal policy.
More specifically, the federal budget currently is consuming 21 percent of gross domestic product, but will consume 23.4 percent of economic output in 2030 if fiscal policy is left on autopilot.
Here is a chart, based on CBO’s new data, that shows why we should be very concerned.
By the way, last year’s long-run forecast from CBO shows the problem will get even worse in the following decades, especially if there isn’t genuine entitlement reform.
We’re in trouble today because government has been growing too fast, and we’ll be in bigger trouble in the future for the same reason.
But the situation is not hopeless. The problem can be fixed with some long-overdue and much-needed spending restraint.
We don’t even need to cut spending, though that would be very desirable.
As this next chart illustrates, our budgetary problems can be solved if there’s some sort of spending cap.
The grey line shows the current projection for federal spending and the orange line shows how much tax revenue Washington expects to collect (assuming the Trump tax cut is made permanent). There’s a big gap between those two lines (the $1 trillion-plus deficits everyone else is worried about).
My contribution to the discussion is to show we can have a budget surplus by 2028 if spending only grows by 1 percent annually and we can balance the budget by 2030 if spending grows by 1.7 percent per year.
Needless to say, I’m not fixated on balancing the budget and eliminating red ink.
The real goal is to change budgetary trend lines with a spending cap so that the fiscal burden of government begins to shrink as a share of the nation’s economy.
The bottom line is that modest spending restraint (government growing at 1.7 percent annually, nearly as fast as projected inflation) would slowly but surely achieve that goal by gradually reversing the big-government policies of Bush, Obama, and Trump.
[…] It’s also worth noting that these numbers will probably deteriorate even further over the next few months. Politicians are likely to approve more handouts and subsidies. And if there’s not a rapid economic recovery (I express doubt about that outcome in my remarks), tax revenue will continue to fall far short of baseline estimates. […]
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And exactly how does one keep Entitlement spending increases to 1% ????
It won’t matter if they fix Washington’s budget, because the Federal budget will doom us all with a financial meltdown.
the political class has lost touch with reality… (socialist democrats or republicans… it makes little difference…) they share an insanity that will lead us to ruin unless we make significant systemic reforms… we can no longer allow these lunatics free range to purchase their power and privilege by mortgaging the future of our great grandchildren… they neglect R&D in favor of unending warfare that benefits the military industrial complex and destroys the lives of some of our best and brightest young people… entitlement reform and other tough issues are neglected… as these miscreants whiz away billions of taxpayer dollars on the equivalent of a political food fight… we have to find a way to stop this nonsense and end the profligate spending by our political class… we must elect people with the intelligence and inclination to put a stop to this insanity… we have to cancel their blank check… and limit their terms… and we have to do it soon…
“Freebies for Everyone”
BY JOHN STOSSEL
https://pjmedia.com/news-and-politics/freebies-for-everyone/
Unfortunately politicians will react to the information provided by Mitchell in a bad way. Politicians will say, “Mitchell shows us how easy it is to fix our spending problem. Therefore spending isn’t that big of a problem now. We can spend even more now and worry about fixing it much later.”