Deficit Is On ‘Daunting’ Trajectory

The federal government is spending far more than it takes in each year—a problem that’s likely to get worse in the absence of a course correction that is nowhere on the horizon.

That was the message the government’s budget watchdog delivered to lawmakers Tuesday in testimony before the Senate’s budget committee.  

“The fiscal outlook is daunting,” Phillip Swagel, director of the Congressional Budget Office, a nonpartisan research agency, told committee members. “Our projections suggest that changes in fiscal policy must be made to mitigate adverse consequences of high and rising debt.”

Swagel’s testimony highlighted the latest 10-year budget projections from the CBO, which show that the government is on course to spend $1.9 trillion more in 2024 than it takes in. Those budget deficits are set to deepen as spending on Social Security, Medicare, and interest payments on the national debt grow faster than tax revenue.

Put another way: The debt, currently 99% of the country’s annual economic output as measured by the gross domestic product, will swell to 122% by 2034, according to the CBO.

Parties Blame Each Other For Deficits

Republicans and Democrats at Tuesday’s hearing each pointed to different sources of the imbalance. 

Committee chair Sheldon Whitehouse, a Democrat who represents Rhode Island, blamed tax cuts by presidents George W. Bush and Donald Trump, which he saisd enlarged the deficit and benefitted mainly the wealthy. 

That point may become especially relevant over the coming year as many provisions of the Trump tax cuts enacted in 2017 are set to expire in 2025, setting up a political battle over whether, and how much, to extend them.

In the CBO’s analysis, the cuts stimulated the economy to some extent by indirectly raising tax revenue, but not nearly to the point where they offset the cuts.

“By far, it did not pay for itself,” Swagel said at the hearing. “The same would apply for the extension of the 2017 act.”

Iowa senator Chuck Grassley, the senior Republican member of the committee, said President Joe Biden’s spending programs were making the problem worse, singling out his executive actions to forgive debt for borrowers with federal student loans. Two of his biggest initiatives, the SAVE repayment plan and a proposed program to forgive debt for financially distressed borrowers and others, would cost $559 over 10 years, researchers at the University of Pennsylvania recently estimated. 

“President Biden continues to use his pen and phone to spend trillions, particularly on student loan bailouts in these unprecedented fiscal times,” Grassley said.