CBO Debt Estimates Undermine Biden’s Big Deficit Cut Claims

WWhile newly released figures from the Congressional Budget Office do not predict a recession in 2022, the office’s long-term analysis predicts a sharp increase in the national debt that the Biden administration, or a future administration, will need to address.

President Joe Biden has boasted of reducing the deficit by $1.5 trillion from 2021 to 2022, but that still leaves nearly $1 trillion in annual debt that will grow over time.

CBO projects fund will pull back from soft landing and avoid recession

“Overall, it’s an encouraging report if you’re looking at next year, and a very worrying one if you look beyond that,” said Mark Goldwyn, senior policy director at the Committee on Responsible Federal Budget. “I was struck by how quickly deficits are expected to rebound after 2022.”

The Central Bank of Oman expects the national debt to fall to 96% of GDP in 2023, due to a combination of economic recovery and high inflation, effectively reducing previous debt. But the number is expected to reach a record 110% by 2032, with a total deficit of $15.7 trillion added over the next decade.

Goldwyn criticized Biden’s previous boast of reducing the deficit year on year, mostly because the US bailout in March 2021 is the reason the deficit was so high.

The White House repeated that talking point when asked about Amnesty International’s forecast on Thursday.

“The Central Bank of Oman expects our deficit to fall by $1.7 trillion after it was down by $350 billion just last year,” White House Press Secretary Karen-Jean-Pierre said. “That’s after increasing the deficit every year President Trump has been in office.”

The deficits were much lower than they were during 2020 and 2021, but they are now backing down somewhat with the direction they were headed before the shutdowns and restrictions that upended the economy in those two years.

“Compared to the pandemic, the financial situation looks better today,” Goldwyn said. “Overall it looks similar to before the pandemic, with a shortfall of about a trillion dollars a year.”

Debt expectations are likely to be higher if Biden passes the $3.5 trillion rebuilding bill last year. However, Biden needs to enact policies that will not continue to fuel rising debt and inflation, Goldwein argues, such as ending a student loan default in August as scheduled and refusing to deposit any of that debt into public coffers.

Another way to help, Goldwein said, would be to lower drug prices, which would reduce some of the massive amounts spent each year on Medicare and Medicaid.

The CBO’s long-term outlook is not encouraging but could be very optimistic if the US falls into a recession. Goldman Sachs predicts a 35% chance of a recession in the next two years, while the Wells Fargo economic model predicts a 30% chance of a recession in the next six months alone.

“The CBO has inflation at around 5% this year and then back down to the 2% range. I’m a little nervous about that forecast,” said Bill Hoagland, senior vice president of the Bipartisan Policy Center. “That’s a little more optimistic than I would have expected for the future.”

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In other words, the deficit is expected to reach a historically high level of 110% of GDP over the next decade, even if a major military conflict or recession fails to emerge.

Deficit spending has become a partisan norm, rising under both Republican and Democratic presidents. To really rein it in, Hoagland argues, it will take stabilization benefit programs like Medicare, Medicaid, and Social Security, long considered the “third rail” of untouchable politics, which together make up roughly 65% ​​of total spending. Federal.

“It’s a cliché, but it’s a tax on future generations,” said Hoagland, a CBO alumnus. “Someone is going to have to pay that debt. That means either a lower standard of living, more inflation, or more taxes. We’re basically taxing future generations.”