The Congressional Budget Office will release deficit projections for the next 10 years and, in case anyone is interested (and no one seems to be), it will show budget deficits in excess of 1 trillion dollars every year.
There will be wailing and gnashing of teeth from some Republicans and Donald Trump will pretend he didn’t sign a federal budget with hundreds of billions of dollars in increased spending. But we’re about to enter an era where trillion dollar deficits are the new normal.
What’s absolutely astonishing is that in this election year, the trillion dollar budget deficits will not be a major issue. Certainly, some of the few budget hawks remaining in Congress will try and make a big deal about it, but they will be whispering in a hurricane. No one wants to think about what these deficits mean to the economy or to the financial well being of individuals — notably our grandchildren.
Although there have been private sector projections for months (including my post from last October) that the government’s red ink will hit and exceed a trillion dollars for years to come, this will be the first report by Congress’s official budget watchdog since last year’s big tax cut and this year’s spending deal were enacted that will show the deficit rising precipitously and staying at that very high level through the next 10 years.
The official CBO projections are likely to be lower than the budget deficits that actually occur. CBO’s report is based on current law and makes no political judgements about what Congress and the president will do in the future. That means the deficit projections will be based on the presumption that the tax cuts enacted last year that currently phase out will in fact end. That means the CBO forecast will assume that future revenues will be higher and the deficit lower compared to what is likely to occur.
The same is true for spending. For this report, the Congressional Budget Office doesn’t presume that any of the reductions proposed in the Trump 2019 budget will be enacted. That will increase the deficit outlook compared to what the White House will say it will be.
For the record (and before the trolls come out to play), there were indeed four consecutive trillion dollar federal deficits during the Obama administration from fiscal 2009-2012. Those deficits were primarily caused by the Great Recession and were temporary. By contrast, the trillion dollar Trump deficits are permanent changes to the federal budget outlook caused by enacted reductions in revenues and increases in spending.
The Trump deficits assume a relatively high-level of economic growth. If the economic outlook doesn’t turn out to be as rosy as the White House is promising, the very high Trump era federal budget deficits will be even higher.
There will be those reading this who will refuse to believe that the CBO’s projections are real, that they are partisan hacks who want to make Trump and the GOP look bad. Denying reality has become commonplace on both the left and right in recent years, with both sides substituting comfortable illusions to explain what’s happening. Eventually, though, reality has a nasty tendency to catch up with the illusion. In the case of trillion dollar budget deficits, the real world consequences will be felt soon enough.