Rosy Look of the Ballooning Deficit

Thanks to tax cuts and spending increases, US deficit estimates are spiraling up. Let's investigate some estimates.

Bipartisan Deal Makes Shows Republican Hypocrisy

The deficit projection chart is from the New York Times article Budget Deficits Are Projected to Balloon Under the Bipartisan Spending Deal

Spending Projections

$716 billion dollars a year for "defense" is absurd.

US drone policy, dropping bombs indiscriminately, and never ending wars are all extremely counterproductive.

Republicans are only interested in spending cutbacks when they do not control the White House.

Compromise is as it always was: reckless spending by both parties.

Big Government is Back

Big government is officially back in style. Republicans propelled themselves to power in Washington by promising an end to fiscal recklessness. They are now embracing the kind of free spending and budget deficits they once claimed to loathe.

On Friday, Congress passed a bipartisan spending deal that blows through the caps imposed by the 2011 Budget Control Act, unlocking $300 billion in additional spending for the military and domestic programs over the next two years. That comes on top of last year’s $1.5 trillion tax cut package and as the White House prepares to unveil on Monday a $1.5 trillion infrastructure plan that would require $200 billion in government funding.

While the White House says it plans to offset that $200 billion through unspecified cuts, none of the other spending is paid for at a time when the nation’s debt already tops $20 trillion.

“With this deal, we will experience trillion-dollar deficits permanently,” said Andy Roth, vice president of the conservative Club for Growth. “That sort of behavior, the last time I checked, is not in the Republican platform.”

“I think it’s a little bit surprising and puzzling,” said Jason Furman, a former chairman of Mr. Obama’s Council of Economic Advisers, noting that trillion-dollar budget deficits is uncharted territory during a period of full employment. “We’ve never had anything like that outside of a war or a recession.”

Rosy Look

I promised a "rosy look" at this grim pictured. Here it is:

The nonpartisan Committee for a Responsible Federal Budget projects that the United States will run $2 trillion annual budget deficits by 2027 and have a debt-to-gross domestic product ratio of 105 percent — a level not seen since the end of World War II.

That rosy look assumes no recession, no additional spending "compromises", no infrastructure spending impact, and $200 billion in unspecified cuts that will never happen or will be quickly unagreed to.

With those rose colored glasses on, deficits will run "only" $1.2 to $1.5 trillion, increasing to $2 trillion by 2027.

That should have been $716 not $761 in my Tweet.

Reader Dave, a friend, pinged me with his comments on the above stories. "The deficits right after the 2008 financial crisis were a combination of safety net spending and countercyclical spending. I think that the addition to national debt will be at the upper end of the estimates (close to $3 trillion) rather than the commonly cited figure of $1.5 trillion."

I agree, but add this caveat: Both of us may be quite a bit optimistic.

Mike "Mish" Shedlock

My biggest disappointment with The Donald is the continuing useless, wasteful and often illegal foreign military excursions.

Rand Paul is the only patriot in the Senate, in my estimation.

You nailed it Mish. I hope you will be a guest on Coast to Coast AM soon.

Would you expect anything less from anyone who's proud of the moniker "king of dept",talk bout a 180!damn,he'll rack up as much dept in four as barry did in eight lol

So we are talking about $1,000 Billion deficits -- and defense spending is projected to be only $716 Billion. So if we shut down the military, closed down Veterans Administration hospitals, stopped paying pensions to military retirees (all part of that projected $716 Billion), then the Federal Government would still be running an unsupportable deficit. Cutting military spending is fine -- as long as obligations are cut first. (E.g., let the Russians have Europe; they are welcome to that headache). But we need to remember that something like 2/3 of Federal spending is on "Entitlements". The Political Class is not willing to countenance any reduction in their Rob Peter to Pay Paul game. The question is how to get Congress (Democrats as well as Republicans) to behave responsibly and make the tough choices they were elected to make.

No, wait,,, but, I thought we owed it all to ourselves? Oh, forgot. It's not denominated in real money. Carry on.

But, do get back to me when the Federal Funds rate is 21% and real rates are at Minus 16% or so.

So far as I know, the last President that actually read the budget and attempted to balance it, was Jimmy Carter. Before that, it would be Eisenhower.

It often claimed that the guiding principles of post-Great Depression economies are based on Keynes’ economic theory. THIS IS PATENTLY FLASE. Keynes was very clear about the role of government: It should utilize deficit spending to stimulate aggregate demand through deficit spending at times of economic recession BUT run surpluses when the economy is performing positively. That is a much more productive and durable mechanism of evening out of the economic cycle than the current modus operendi which involves running constant, endless deficits with central banks then papering over the rot in the economy during times of recession with massive amounts of printed money, which then just sets up the next giant bust... that is invariably described as “nobody saw coming”.

When Trump was elected, I was hopeful that he might hold the line on spending, give up on his costly promises (more military spending, the wall), and cut regulation (which I believe he did). Instead, he is following the same old Republican idea of borrow and spend, and cut taxes. The deficit is going to increase dramatically while the economy is near capacity, and with unemployment at record lows. On top of this, he plans on further deficit spending on infrastructure. This is a perfect storm of fiscal irresponsibility. Your grandchildren, and their grandchildren will suffer as a result. Very sad. I feel sorry for Americans.

As I like to point out; the only way to rein in spending, is for the populace to grow up, wake up and, en masse, support a candidate that promises to flat out just flip creditors the bird, show them some nukes, and tell them to go stuff it.

Doing so, WILL rein in the deficit. The only way it will ever be cut: By reducing the ability of government to borrow. If the clowns can borrow to fund hookers, blow and welfare for their cronies; against collateral in the form of the assumed labor of their captive field niggers; they will do so. Only once the slimeballs simply cannot borrow anymore, because of creditors no longer trusting them to still have their niggers firmly under the whip, will they make any effort at behaving in a fiscally responsible fashion.

There is no “other way.” No “let’s all hold hands, sing Kumbaya and have a conversation about it and come to an agreement without hurting anybody’s feelings.” Only by making continued borrowing expensive enough to be de facto impossible, will it stop. And the only way to make that happen, is to place genuine fear in the hearts of every creditor, that not only will they never get paid, but noone will even make the slightest effort to pay them. Nor give even half a lick about pointless and clueless babble about “you promised” (virtually no current nor future taxpayer ever did), “we must pay OUR debt” (ain’t mine unless my signature is on the loan document, dumbass!) and “we have a contract” (Yeah, you do. With that specific guy sitting in Washington collecting retirement after “serving” the country by turning it into a totalitarian hellhole beholden to dimwits like you. Not with other people’s children. Sucker!)

Quote: 'the only way to rein in spending, is for the populace to grow up, wake up and, en masse, support a candidate that promises to flat out just flip creditors the bird..There is no “other way.”'
While what you suggest would work in theory it can never happen. The reason is that well over half the population is already dependent on government or allied with it. Many are on welfare. Many more are government employees. Still more receive government subsidies of one form or another. Still more work for big Corporation, who are closely tied into the governmental block, in as much as big corporations are "comfortable" and protected from competition by regulations. Taken together these groups probably account for 70% of the population, and they will never vote to turn off the spigot.
If you look at history, there is only way it ever ends. All Democracies end, and and they all end the same way, usually after 20-200 years. First you end up with a set of career politicians, who discover they can be elected and re-elected by voting to spend to public purse to make a large portion of the electorate beholden to government. Then the government slowly goes bankrupt, and in time the productive economy ceases to be able to support the ever increasing government. Eventually the government is no longer able to fulfill it's promises, and the people who have come to depend on government rebel. This in turn leads to three paths. The first is that the military can take over and suppress the rebellion, leading to a military dictatorship (and they would take the path you suggest, non-payment of the debt). The second is that the populists take over, leading to a series of chaotic regimes (and they would certainly refuse to pay the old debt). The third is that surrounding countries take the opportunity to overrun them (in which case the debt doesn't get paid). It doesn't matter if it is Ancient Greece, Modern Greece, Ancient Rome, or modern Argentina. It's been done again and again in the past, and will be done again and again in the future because that is the nature of democracies.
We aren't to the end yet. How will you know we are close? When the US is no longer able to borrow money in it's own currency, we are close because that will mean we are reaching the point where government can no longer meet it's commitments to all the people dependent on it. This could mean bonds backed by real estate holdings (national parks). It could mean inflation-adjusted bonds (some of which are already issued). It could mean bonds backed by gold. It could mean bonds issued in some new world currency. Since we aren't there yet, it's hard to know what it will look like, but you'll know it when you see it.

Sadly even the budget defecit chart at the beginning of this article is wrong... for instance, it shows a 2016 deficit of about 0.6Trillion. Go to the treasury site national debt to the penny and you will find we actually borrowed 1.4Trillion in 2016.

And Kinda has it right,,, cut defense to 0.0 and you're still running a deficit.... entitlements are the big problem that won't be fixed.... not to mention all the other pension systems out there with problems..

Good insights by many. Very complex problem. No easy solutions. One way to look at it is that today’s Americans are benefiting at the expense of their grandchildren. I’m not sure how it plays out exactly, other than that the bottom 90% will suffer the most. It’s too bad that the US social security system wasn’t invested like many of the pension systems in other countries. Then at least the pensioners would be partly protected.

Stuki: "As I like to point out; the only way to rein in spending, is for the populace to grow up, wake up and, en masse, support a candidate that promises to flat out just flip creditors the bird, show them some nukes, and tell them to go stuff it." In other words, it isn't going to happen.

Heres my new tax plan, end the secret ballot. You vote for A and A signs a budget which adds to the deficit X dollars, X dollars divided by the number of A voters, will get that share as their tax bill. If you voted for B you get a flier.

Your second option, populists, is the only realistic option in the US. At least for some time. A/The/Some specific populists may be from the military, as is common in in South America, but the distance between the military and politics is too great in the US for a straight up Coup to take place. Most of the military, officers even, are not from the prime leeching classes, for one. In America, rich dilettantes become lawyers, banksters, “investors” and “asset owners” aka Federal Reserve welfare recipients. Not officers (thank goodness, considering the quality and quantity of kit our military possesses….)

Overran by Mexico is also some ways off, paranoid Trump fans notwithstanding. Ditto moose mounted mulletarian hordes swinging hockey sticks while drunk on Molson…. Now, over time; unless things change A LOT, Latin America will prove fertile ground for so called “radical” Islam. Just like Africa is. Simply because the Latins are about a generation ahead of “us” in experiencing the inevitable failure of progressivism. Sharia may in some respects kinda suck compared to Jefferson’s vision of America the Free. But compared to being simple chattel slaves for a bunch of Banksters and other incompetents making up arbitrary “laws” by the hundreds of thousands of pages a year solely for their own benefit; having a proper, justifiable and somewhat verifiable by all, law, regardless of specifics, is quite the blessing. And then, the Islamists will spread north. Just as Latin criminality currently, and to and accelerating degree, is doing.

But until then, the upside is a populist promising default doesn’t really have to win outright. All he needs to do, is get close enough to put some fear into creditors. Enough so that rates increase markedly. Thus, making funding deficits/accumulated debt tougher. Which will mean the average guy will feel the burden of paying interest etc. more directly. Which will further increase the appeal of “default populists.” And so on, and so on, in a virtuous circle, until, one day, the whole rotten charade comes tumbling down. No doubt with the scum, and their various sycophantic useful idiots, turning on each other, each blaming the other guy. Instead of realizing that it is the whole “system” itself that is a failure. And noone having any faith in it, is any more than a self-serving and/or clueless dunce.

Politicians get re elected, and receive campaign "contributions" by providing free lunches and other peoples' money to supplicants. That's how they stay in office. There is no way to fix this without single terms and federally funded (exclusively) campaign funds.