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The U.S. Government’s Built-In Deficits

Thursday November 17th, 2016   •   Posted by Craig Eyermann at 6:57am PST   •  

The Committee for a Responsible Federal Budget wrapped up its analysis of the 2016 fiscal year back on November 2. When they did, they produced the following chart showing what the future of the U.S. government’s budget deficits will be even if all of the winners of all of 2016’s elections for national office on November 8 do absolutely nothing about the U.S. government’s spending when they start their terms in January 2017:

The deficit remains over three and a half times as high as in 2007 (just over 2 percentage points higher as a percent of GDP) and is projected to grow over time. Under CBO’s current law baseline, annual deficits will return to trillion-dollar levels by 2024. Under a more pessimistic Alternative Fiscal Scenario in which policymakers fail to pay for new spending and extended tax cuts, trillion-dollar deficits return by 2021 and reach $1.5 trillion – a nominal-dollar record – by 2026.

Fig. 3: Trillion Dollars Deficits to Return by 2024 (Billions of Dollars)

deficit return with AFS

Though deficits have declined in recent years, the good news has ended; the era of declining deficits is over. This year’s deficit has risen 34 percent from last year, and CBO expects trillion-dollar deficits to return by 2024. Meanwhile, debt will reach a new post-World War II era record of 76 percent of GDP at the end of 2016 and rise further to 86 percent of GDP by 2026.

If you do check out the report, be sure to see Figure 2, which shows how fast the national debt increased during all that period of “falling deficits” shown in the chart above!

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November 2016