Saturday, May 13, 2023

US budget deficit growing larger now and later. Like when we raised the debt ceiling under Trump

As the hostage standoff known as the debt limit debate continues in DC, there were a couple of ominous releases from the Congressional Budget Office that indicated action would need to come sooner. The first involved a release where the CBO mentioned that if some action isn't taken on the debt ceiling, bills will stop being paid in the next few weeks.
The nonpartisan Congressional Budget Office on Friday added more urgency to the fight over the debt limit, now saying there is a "significant risk" the U.S. will default on its debt "at some point in the first two weeks of June."

In a new report, the agency said "the extent to which the Treasury will be able to fund the government's ongoing obligations will remain uncertain throughout May, even if the Treasury ultimately runs out of funds in early June."

This is an escalation from agency's previous assessment of how soon the government won't be able to pay its bills. In a May 1 blog post, the CBO warned of a greater risk Treasury would run out of funds in early June, while in February the CBO targeted July as the month where the U.S. would no longer be able to meet its obligations.
And on Friday, there was another CBO update from February's assessments, with another analysis of the US's budget outlook over the next 10 years. And while the overall deficit picture wasn't much different than what the CBO had 3 months ago, it is larger than what was expected a couple of years ago.

Worse, the CBO indicated in its report that these figures didn't account for the revenue shortfall that we saw in April, which has sped up the "X-date" for the debt limit.
This report updates CBO’s budget projections released in February 2023. The updates to the projections of outlays reflect numerous technical changes, including those that take into account new information released with the President’s annual budget request and other information available as of March 30, 2023. Updates to projections of revenues are more limited: A comprehensive revision of revenue projections is typically based on an updated economic forecast; the projections in this report are based on the economic forecast the agency published in February.

The Budget in 2023. CBO’s current projections show a federal budget deficit of $1.5 trillion for 2023—which is $0.1 trillion more than the agency estimated in February. The estimate of the 2023 deficit is subject to considerable uncertainty, which has grown more apparent since late March, when the updated projections were finalized. Since that time, CBO has learned that revenue collections through April were less than the agency expected, which could affect total revenues for fiscal year 2023 (which ends on September 30, 2023). Outlays also could differ significantly from CBO’s projections, most notably depending on the outcome of a case currently before the Supreme Court regarding the cancellation of outstanding student loan debt.
And US tax revenues were already falling in previous projections, as the COVID and stimulus boom wore off, the stock market declined in 2022, and higher 2022 inflation caused a back-door tax cut this year due to the indexing of tax brackets.

And that revenue shortfall is a large reason why the deficit has had a significant increase in Fiscal Year 2023, although it is nowhere near the depths we had in the COVID-related Fiscal Years of 2020 and 2021.

But also see how the deficit was growing in 2019? Back then we also had a divided Congress, except it was the House that was run by Democrats and the Senate was controlled by Republicans, and we were also approaching the debt limit as well as a budget debate that Summer.

So why didn't we have a debt limit crisis back then, or in the 2 years after? Because it was taken off the table, likely because a Republican was in the White House at the time.
President Trump signed budget legislation which suspends the debt ceiling for two years [on August 1, 2019]. The Senate passed the deal, cut between the White House and Democratic congressional leaders, [the day before]. The budget will raise spending by $324 billion and would also suspend the debt ceiling until July 2021, eliminating the prospect of an ugly battle before the 2020 election.

The bill passed the Senate on a bipartisan basis with 67 yeas to 28 nays.

Last week, the House passed the two-year spending and debt limit deal 284 to 149, with 219 Democrats voting in favor and 16 voting against. Sixty-five Republicans supported the measure. However, some fiscal hawks in the Republican Party opposed the bill.
Did you catch the part where the debt limit was suspended until after the 2020 elections? They didn't even put a number on it! That numerical limit only came back on August 1, 2021 (here's a good resource on the debt limit increases in Trump's first 3 years in office).

Between August 2019 and August 2021, our deficits exploded, and our national debt went up by 29%, from just over $22.0 trillion to more than $28.4 trillion. And yet our dollar grew stronger and interest rates stayed low until the economy recovered and the Fed decided to slow inflation instead of pumping up asset prices helping the economy. So don't tell me that Republicans have any leg to stand on here, and that there is some urgent need to stop paying our bills because of some artificial number that was set 2 years ago.

Yes, our national debt is an obnoxious number, and there are needs to right-size some spending AND RAISE REVENUES. (how isn't any part of the 2017 GOP Tax Scam on the chopping block? Especially the giveaways to the rich and corporate?). But we should be discussing how to do so over the next 4 1/2 months, without a need to make any concessions on the current budget, paying our bills, and keeping people in jobs and making incomes.

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