The fiscal picture is worse than it looks—and it looks bad

[Rogue Valley]

The fiscal picture is worse than it looks—and it looks bad

White House Budget Director Mick Mulvaney, House Speaker Paul Ryan, and Treasury Secretary Steven Mnuchin

April 11, 2018

On the surface, CBO’s new projections of the federal debt and deficits over the next 10 years paint a troubling picture. But, dig deeper and the story gets … more dire. The Federal government is not only running enormous deficits, but we are doing so at a time of full-employment. When the inevitable recession comes, we will be in deep trouble. Here’s the bad part: Under current law, CBO projects that the debt—currently 77 percent as large as annual GDP—will rise to 96 percent of GDP by 2028. And that’s if Congress does nothing. If instead, Congress votes to extend expiring tax provisions—such as the many temporary tax cuts in the 2017 tax overhaul—and maintain spending levels enacted in the budget deal (which is called the “current policy” baseline), debt is projected to rise to 105 percent of GDP by 2028, the highest level ever except for one year during World War II (when it was 106 percent). Here’s the worse part: The conventional comparison is misleading. The projected budget deficits in the coming decade are essentially “full-employment” deficits.

This is significant because, while budget deficits can be helpful in recessions by providing an economic stimulus, there are good reasons we should be retrenching during good economic times, including the one we are in now. In fact, CBO projects that, over the 2018-2028 period, actual and potential GDP will be equal. As President Kennedy once said “the time to repair the roof is when the sun is shining.” Instead, we are punching more holes in the fiscal roof. In order to do an “apples to apples” comparison, we should compare our projected Federal budget deficits to full employment deficits. From 1965-2017, full employment deficits averaged just 2.3 percent of GDP, far lower than either our current deficit or the ones projected for the future. The fact that debt and deficits are rising under conditions of full employment suggests a deeper underlying fiscal problem. CBO’s budget projections are a harsh reminder that the fiscal largesse that Congress and the Administration lavished on the country in the recent legislation is not a free lunch.

The coming economic recession and its pain will be egregious, and potentially cataclysmic for the poor and middle class. There is a price to pay for the ballooning Federal deficit and shrinking Federal revenues.

Remember the 2017 tax legislation, and how the GOP rammed it through Congress and then fled/retired in droves.

Related: U.S. runs budget deficit of $209 billion in March, Treasury says

 

[holbritter]

The fiscal picture is worse than it looks—and it looks bad

White House Budget Director Mick Mulvaney, House Speaker Paul Ryan, and Treasury Secretary Steven Mnuchin



The coming economic recession and its pain will be egregious, and potentially cataclysmic for the poor and middle class. There is a price to pay for the ballooning Federal deficit and shrinking Federal revenues.

Remember the 2017 tax legislation, and how the GOP rammed it through Congress and then fled/retired in droves.

Related: U.S. runs budget deficit of $209 billion in March, Treasury says

Will it be worse than the last recession?

 

[Sampson Simpson]

The fiscal picture is worse than it looks—and it looks bad

White House Budget Director Mick Mulvaney, House Speaker Paul Ryan, and Treasury Secretary Steven Mnuchin



The coming economic recession and its pain will be egregious, and potentially cataclysmic for the poor and middle class. There is a price to pay for the ballooning Federal deficit and shrinking Federal revenues.

Remember the 2017 tax legislation, and how the GOP rammed it through Congress and then fled/retired in droves.

Related: U.S. runs budget deficit of $209 billion in March, Treasury says

It is absolutely astounding how dishonest many republican voters are. Republicans have been doing this dirty nonsense for decades, and yet they keep buying it. There is no denying the sketchiness of republicans, particularly under Trump presidency. Yet, we see people defending them over and over. They aren't even hiding it, all leaving and eventually going to get cushy jobs to cash in on their theft of the treasury. And they have no shame in even trying to hide it

And people keep sticking their heads up their asses and ignoring it

 

[Spartacus FPV]

Will it be worse than the last recession?

Well, we don't have a whole lot of room for lowering the interest rate and quantitative easing has its diminishing returns. Our toolbox is empty.

... Perhaps Elon Musk will save us!

 

[JANFU]

Will it be worse than the last recession?

Some are predicting a massive correction in share prices. Thing is, the debt keeps growing, while interest rates are low now, I recall the 80's when they were in the 15-18 % range.
Eventually inflation hits, rates rise, and the US is spending approx 7 % of revenue servicing the debt.
2016 spent 276 B on debt costs- 2017 - 474 B. And rates have not risen much. The **** will hit the fan at some point, and spending with the massive deficits the US is running will come home to roost
Canada went thru this in the later 70's to early 90's. And when we finally confronted the debt, the cuts were massive.
Our current PM is on a deficit spending spree, but that will hurt them in the next election.

 

[Lutherf]

The problem is that the only solution the Democrats will approve is increasing both taxation and government spending. Spending cuts to anything except the military are strictly opposed. Republicans, frankly, aren't much better. They'll talk about cutting this, that or the other but never manage to actually get it done.

There is ONE solution to this issue and that is to move to a system where primary taxation and primary responsibility for entitlement programs is handed back to the states. That's the only way we will ever see a check on government spending and it's the only way we can reasonably accommodate preferences for both fiscal restraint and the funding of "social safety net" programs.

 

[WCH]

"We have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks ... Some people think the Federal Reserve Banks are United States Government institutions. They are not Government institutions. They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign customers ... The Federal Reserve Banks are the agents of the foreign central banks ... In that dark crew of financial pirates, there are those who would cut a man's throat to get a dollar out of his pocket ...

Every effort has been made by the Federal Reserve Board to conceal its powers, but the truth is the Fed has usurped the government. It controls everything here (in Congress) and controls all our foreign relations. It makes and breaks governments at will ... When the Fed was passed, the people of the United States did not perceive that a world system was being set up here ... A super-state controlled by international bankers, and international industrialists acting together to enslave the world for their own pleasure!"

-- Speech by Rep. Louis McFadden, 1932-06-10

 

[Lord Tammerlain]

Will it be worse than the last recession?

Hard to say

The stock market is a good 30-40 % over valued for current earning, but a drop in the stock market would not hit as hard as the housing crisis did. But the government debt is very high limiting the amount of potential government stimulus that can be applied.

So excluding a trade war causing a worldwide slowdown, the next recession would not hit as hard as the one in 2008, expect one more of the size of 2001-2

 

[Fletch]

The fiscal picture is worse than it looks—and it looks bad

White House Budget Director Mick Mulvaney, House Speaker Paul Ryan, and Treasury Secretary Steven Mnuchin



The coming economic recession and its pain will be egregious, and potentially cataclysmic for the poor and middle class. There is a price to pay for the ballooning Federal deficit and shrinking Federal revenues.

Remember the 2017 tax legislation, and how the GOP rammed it through Congress and then fled/retired in droves.

Related: U.S. runs budget deficit of $209 billion in March, Treasury says

Why do you only have pictures of republicans? Why not include a photo of Schumer or Durbin or the other 33 democrat senators who voted for the spending bill? Oh I get it, being honest would destroy your phony narrative. Carry on then.

 

[jonny5]

The fiscal picture is worse than it looks—and it looks bad

https://meg]
[B][SIZE=1]White House Budget Director Mick Mulvaney, House Speaker Paul Ryan, and Treasury Secretary Steven Mnuchin[IZE][B]



The coming economic recession and its pain will be egregious, and potentially cataclysmic for the poor and middle class. There is a price to pay for the ballooning Federal deficit and shrinking Federal revenues.

Remember the 2017 tax legislation, and how the GOP rammed it through Congress and then fled/retired in droves.

Related: [B][url="https://www.marketwatch.com/story/us-runs-budget-deficit-of-209-billion-in-march-treasury-says-2018-04-11"]U.S. runs budget deficit of $209 billion in March, Treasury says[/url][B][/QUOTE]

Except revenues are growing. 44 trillion will be taken in the next decade. That seems like more than enough.

[QUOTE]In CBO’s baseline projections, after a further slight
decline in 2019, revenues rise markedly as a share of the
economy, growing to 18.5*percent of GDP by 2028. [/QUOTE]

Certainly there is a price to pay for out of control spending, though. We need cut social spending significantly.

 

[Floridafan]

Except revenues are growing. 44 trillion will be taken in the next decade. That seems like more than enough.



Certainly there is a price to pay for out of control spending, though. We need cut social spending significantly.

Yearly deficits of 1 trillion plus are projected by 2020, and if the tax cuts remain in place they could grow to 2 trillion yearly, shortly afterwards.
How about cutting defense spending, which is completely out of control.

 

[ludin]

The fiscal picture is worse than it looks—and it looks bad

White House Budget Director Mick Mulvaney, House Speaker Paul Ryan, and Treasury Secretary Steven Mnuchin



The coming economic recession and its pain will be egregious, and potentially cataclysmic for the poor and middle class. There is a price to pay for the ballooning Federal deficit and shrinking Federal revenues.

Remember the 2017 tax legislation, and how the GOP rammed it through Congress and then fled/retired in droves.

Related: U.S. runs budget deficit of $209 billion in March, Treasury says

:doh

Recessions are part of the natural cycle of things. In fact they are needed similar to how control burns are needed in a forest to keep the forest healthy and alive.
Recessions get rid of the bad stuff and let new things grow or at least that is how it is supposed to work. The too big to fail mentality only delayed
that affect. Nothing is too big to fail and some things should fail.

The impact is how sever the recession is. The severity of the recession depends on how sick the economy really is how much needs to be removed.
The tax legislation is fine it has nothing to do with recessions.

 

[jonny5]

Yearly deficits of 1 trillion plus are projected by 2020, and if the tax cuts remain in place they could grow to 2 trillion yearly, shortly afterwards.
How about cutting defense spending, which is completely out of control.

We did. Didnt help because social spending grew much faster than we could cut defense. From 2011, defense spending was cut from 700bn a year to 590bn a year. During the same time, mandatory spending rose from 2 trillion to 2.5 trillion.

Furthermore, the tax cuts are responsible for only 100bn change per year in revenue, not 1 trillion, and certainly not 2 trillion. The overwhelming factor in deficit increase is entitlements and interest.

 

[Floridafan]

We did. Didnt help because social spending grew much faster than we could cut defense. From 2011, defense spending was cut from 700bn a year to 590bn a year. During the same time, mandatory spending rose from 2 trillion to 2.5 trillion.

Furthermore, the tax cuts are responsible for only 100bn change per year in revenue, not 1 trillion, and certainly not 2 trillion. The overwhelming factor in deficit increase is entitlements and interest.

The government has already confirmed that the tax cuts will be directly responsible for 1-2 trillion increase in our debt. Is the republican plan to raise our debts so high that we will be forced to cut social services?

 

[MrWonka]

The coming economic recession and its pain will be egregious, and potentially cataclysmic for the poor and middle class. There is a price to pay for the ballooning Federal deficit and shrinking Federal revenues.

Remember the 2017 tax legislation, and how the GOP rammed it through Congress and then fled/retired in droves.
[/B]

Sadly it's even worse than this article thinks because not only are we not fixing our debt problem when we should be these tax cuts are accelerating the likelihood and severity of the next crash.

 

[Kushinator]

The coming economic recession and its pain will be egregious, and potentially cataclysmic for the poor and middle class. There is a price to pay for the ballooning Federal deficit and shrinking Federal revenues.

I disagree. It will be run-of-the-mill IMO.

 

[YorkshirePete]

Why do you only have pictures of republicans? Why not include a photo of Schumer or Durbin or the other 33 democrat senators who voted for the spending bill? Oh I get it, being honest would destroy your phony narrative. Carry on then.

Democrat senators? Still don't know the difference between an adjective and a noun?
I thought repubs were in charge of all 3?

 

[YorkshirePete]

Yearly deficits of 1 trillion plus are projected by 2020, and if the tax cuts remain in place they could grow to 2 trillion yearly, shortly afterwards.
How about cutting defense spending, which is completely out of control.

If you count it all defense represents 50% of discretional spending.
Can't do much else while we glorify the military.
"If you are not smart enough to get a real job, join the military. Great socialist benefits"

 

[late]

The problem is that the only solution the Democrats will approve is increasing both taxation and government spending.

Sigh, you never increase taxes in a recession. That's austerity, and the only people that like it love failure. It never works.

 

[late]

The tax legislation is fine it has nothing to do with recessions.

Actually, it's pushing us towards recession. It's not one of the major drivers in that direction, but it's a problem.

 

[late]

If you count it all defense represents 50% of discretional spending.

Stiglitz proved the real cost of war is kept hidden, as much as they can.

 

[ludin]

Actually, it's pushing us towards recession. It's not one of the major drivers in that direction, but it's a problem.

NO it isn't. that is utter nonsense. tax policy doesn't drive anything towards recession unless you
hike taxes to obscene levels.

YOu guys just pull anything out of the air don't you?

:roll:

https://www.investopedia.com/ask/answers/08/cause-of-recession.asp

 

[washunut]

Actually, it's pushing us towards recession. It's not one of the major drivers in that direction, but it's a problem.

Please explain how lowering the corporate tax rate making producing things here will push us into recession?

 

[MTAtech]

Seven years of great abundance are coming throughout the land of Egypt, 30 but seven years of famine will follow them. Then all the abundance in Egypt will be forgotten, and the famine will ravage the land. 31 The abundance in the land will not be remembered, because the famine that follows it will be so severe. 32 The reason the dream was given to Pharaoh in two forms is that the matter has been firmly decided by God, and God will do it soon.

33 “And now let Pharaoh look for a discerning and wise man and put him in charge of the land of Egypt. 34 Let Pharaoh appoint commissioners over the land to take a fifth of the harvest of Egypt during the seven years of abundance. 35 They should collect all the food of these good years that are coming and store up the grain under the authority of Pharaoh, to be kept in the cities for food. 36 This food should be held in reserve for the country, to be used during the seven years of famine that will come upon Egypt, so that the country may not be ruined by the famine.”

https://www.biblegateway.com/passage/?search=Genesis+41&version=NIV

 

[MTAtech]

Please explain how lowering the corporate tax rate making producing things here will push us into recession?

Lowering the corp tax-rate has no effect except to allow corps to buy back their stock. There is no productivity gain at all.