Congressional Budget Office: The debt curve from Hell is upon us
 

... and Trump's top economic advisor (former Fox News host) said on TV today that "everything is fine".

At what point does being lied to matter to Trump supporters? When you go bankrupt? When your stock portfolio is worthless? Oh wait! Most of you are broke already, in more ways than one :1orglaugh

This article is written by a financial advisor on Trump's transition team who was also the deputy assistant secretary of the Treasury and deputy undersecretary of labor under President George W. Bush.

"The Congressional Budget Office’s latest long-term budget projections will — despite repeated warnings — come as a rude awakening for most Americans. The fiscal outlook is dire."

The debt curve from Hell is upon us | The Hill

“At 78 percent of gross domestic product (GDP), federal debt held by the public is now at its highest level since shortly after World War II. If current laws generally remain unchanged, the Congressional Budget Office projects, growing budget deficits would boost that debt sharply over the next 30 years; it would approach 100 percent of GDP by the end of the next decade and 152 percent by 2048.

"The prospect of a large and growing debt poses substantial risks for the nation and presents policymakers with significant challenges,” the CBO stated.

But words alone cannot convey the extent to which the publicly-held federal debt has ballooned in recent years. Words also fail to capture the heavy fiscal and economic toll that the publicly-held federal debt promises to levy in the years ahead.

From 1967 to 2008, the federal debt-to-GDP ratio ranged from less than a quarter to just under half of GDP. Policy analysts projected a large and sustained increase in the debt relative to GDP, but lawmakers were comforted by the knowledge that the day of reckoning wouldn’t occur for years.

Then came the Great Recession. The recession brutalized the U.S. economy and years of debt were compressed into mere months. This raised the publicly-held federal debt to a level not seen since the late 1940s.

It is from this already elevated level that the debt is projected to explode, spiraling to unprecedented levels and, more importantly, feeding what could charitably be called “The debt curve from Hell.”

One saving grace of the Great Recession was that the run-up in the publicly-held federal debt occurred just as interest rates collapsed. This allowed the federal government to finance its debt at little cost.

As recently as fiscal year 2016, for example, the federal government spent $240 billion on interest on the publicly-held federal debt. That’s literally $1 billion less than the federal government spent 20 years earlier to carry a debt only one-fourth as large.

The publicly-held debt has exploded, but we are only now beginning to pay the extra cost of carrying that debt. This year alone, net interest costs will total $316 billion — 32 percent more than just two years ago. And it only promises to worsen.

With interest rates starting to normalize, net interest costs are expected to grow at an average annual rate of 21.7 percent over the next three years and 7 percent a year on average for the subsequent seven years.

Within 10 years, annual net interest costs are expected to soar to $915 billion. The difference between what the federal government paid in interest last year versus what it will pay a decade from now is greater than Argentina’s total annual economic output.

This will place severe pressure on the federal budget. Rising net interest costs will consume roughly half or more of every new dollar of federal revenue in each of the next three years and more than 27 cents of every new dollar of federal revenue over the next 10 years.

Factor in the projected increase in federal outlays for health care and other mandatory spending programs and the federal budget gradually spirals out of control. Rising deficits grow the debt and the growth in the debt aggravates the deficit. It’s a vicious cycle.

This unwelcome development is emerging despite large projected increases in federal revenue. Under current law, revenue will jump from 16.6 percent of GDP this year to 18.5 percent by 2028 and 19.8 percent by 2048.

As House Ways and Means Chairman Kevin Brady (R-Texas) so aptly observed, “One thing has been clear for years: Washington does not have a revenue problem; it has a spending problem.”

Consequently, avoiding the debt curve from Hell will require policymakers to stabilize the federal debt-to-GDP ratio through a combination of deficit reduction and policies to accelerate long-term economic growth.

Unless taxpayers are willing to shoulder a substantially larger tax burden, most of the deficit reduction must come from restraining mandatory spending growth. Discretionary outlays are already slated under current law to fall sharply as a share of GDP.

By contrast, mandatory outlays are projected to grow by 2.5 percent of GDP over the decade. Spending restraint and deficit reduction will produce additional savings in the form of smaller interest payments. This will further reduce the deficit. A virtuous cycle!

Economic growth is the other key to avoiding the debt curve from Hell. Following a decade of stunted economic growth, the U.S. economy is responding positively to Congress’ and the Trump administration’s policy cocktail of regulatory relief and pro-growth tax reform.

Further progress will require new policies to encourage labor-force participation and to train and equip those new workers.

Workfare reform, a new emphasis on technical and vocational training and making the tax law’s expensing provisions permanent (and expanding them to cover structures) would help the U.S. reach its full economic potential.

America is on the verge of the debt curve from Hell. Don’t say you haven’t been warned.

James Carter served as the head of tax policy implementation on President Trump’s transition team. Previously, he was a deputy assistant secretary of the Treasury and deputy undersecretary of labor under President George W. Bush.

We are so fucked.

I'm wondering where this "great economy" Trump and his cultists keep bragging about. Wages are down from a year ago, the DOW has not moved in 7 months, gas prices are up more than 30% from a year ago, the national debt has topped $21 trillion for the first time ever, and the list goes on. This is what republicans consider the "best economy ever"?

Notice that when threads about the stagnant economy, our high inflation or our crippling debt are made, Trumpelstiltskins are nowhere to be seen.

Did the MAGA happen? There was supposed to be lots of MAGA...

The tax cut is also going to cause serious damage to Medicaid. If we don't sustain at least a 3% GDP grown each quarter it triggers a part of the tax cut bill that causes automatic spending cuts to kick in. Among those things that get cut first are Medicare and Medicaid.

If you are curious we haven't had a quarter with 3% growth since the bill became law and went into action.

Way to early to blame any of this on Trump. All this actually started when Clinton (1999) repealed the Glass-Steagall Act. This started over 20 years ago as the debt is no growing exponentially. I actually thought they were going to try and blame Obama in his first than second term. Now they're going to try it on Trump? March 2017, the U.S. debt is about $19.9 trillion as it now is 21.3 trillion. That's $1.4T in a year as in the past it took form 1940-1980 to build that same debt. This will continue to grow again, exponentially until the public loses total confidence in the currency.
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How can Trump be taking credit for a good economy that actually sucks because of Clinton?

Trump is saying the economy is great and that it's because of the changes he's made like Tarrifs and raising the fed rate 5 times in 18 months.

By the way, welcome back to posting on GFY, I see you abandoned your account in 2006 and recently started posting this year, 12 years later :thumbsup

I dunno if he is or not, but what I do know is it's impossible to even turn this economy around. Just to stop the debt acceleration, we'd have to have two industrial revolution with another "type" dot.com growth explosion. What I am really worried about is the growth of our military spending as now $8trillion has been spent from 9/11. Most Americans can't even fathom how much money that truly is.

I agree. Something's got to give as the current trajectory is unsustainable :(

The righties cry about debt when they are not in power and when they are in power it doesn't matter. The sheep buy into it.