Bloated Government And Exploding Deficits
The Federal Government operates in a way that not one Congressperson operates. For the last 50 years, Congressionally approved Budgets have had larger and generally growing deficits.
No responsible American, including those same Congresspeople, would spend 5% MORE than they earned every year. Congressmen and women, on the other hand get rich while in office.
At the same time, constituents struggle. Deficits are sometimes combated by a variety of congressionally approved tax increases upon the constituents, but other times they are increased, as a result of a bestowed “tax cut.”
The true tax is NOT what is paid on one’s 1040. The real burden is Government Spending. While part of it is funded by taxes, the rest is funded by issuance of debt or through inflation from excessive money creation
The Charts above represent the most recent projections from the Congressional Budget Office (CBO). The track record of their forecasts is fairly poor. The charts above depict a steady deficit of 4.4% of GDP for the ten year window into the future.
A differing forecast comes from the US Debt Clock (http://www.usdebtclock.org). Based on an extrapolation of trends, they anticipate a Budget Deficit of $1.93 Trillion in 2023. That works out to 8% of GDP or DOUBLE the ratio forecast by the CBO.
Which Entity is Likely to have a MORE ACCURATE Estimate?
Starting with GDP, the CBO forecasts a level of $24.9 Trillion in 2023, in real terms, which would require an annual growth rate of 3.8% or about TWICE the rate over the last decade. (https://www.cbo.gov/about/products/budget-economic-data).
The growth rate in GDP is MUCH less complicated than it seems. It is the sum of “Productivity” plus Growth in the Labor Force’s hours worked.
This is the explanation by the CBO. “Labor productivity in the US non-farm business sector rose by an annualized 1.9 percent during the fourth quarter of 2018, beating market expectations of 1.6 percent and following a 1.8 percent advance in the previous three-month period. Output grew by 3.1 percent and hours worked by 1.2 percent. Year-on-year, productivity increased by 1.8 percent, reflecting a 3.7 percent gain in output and a 1.9 percent rise in hours worked.”
The US Debt Clock, on the other hand, projects 2023 GDP of $24.04 Trillion, an annualized growth rate of 3.4%.
Productivity growth over the last five years has been roughly 1.5%. With the current FULL employment, growth in the Labor force, or hours worked, will likely approximate US Population growth which is running at 0.7%, That suggests average REAL growth in GDP of 2.2% or so.
Growth in Deficits
The CBO projects a US Budget Deficit of $1.1 Trillion in 2023. The US Debt forecast is $1.9 Trillion. Why the difference?
A central factor in producing higher deficits are entitlements Medicare/Medicaid and Social Security. Those two programs represent 60% of Federal Spending. In 2000, these programs accounted for 42% of Federal Spending. These entitlements are not only growing at a much faster rate than the economy but DRIVE Federal Spending to grow at a faster rate.
Both programs are largely for retirees, the fastest growing segment of the population, Medicare/Medicaid per recipient in 2019 was nearly $20,000 per retiree per year. Private Healthcare costs for 65 and over segment average about $11,000 per year. (https://www.zerohedge.com/news/2019-03-13/heres-how-much-your-healthcare-costs-rise-you-age).
The cost of providing healthcare runs roughly TWICE the overall inflation rate. The number of Social Security recipients is also likely to continue its rapid growth.
Entitlement Programs, With Irresponsible Career Politicians, Do Not Bode Well
Unless the US can manage a means of extracting yet more earned income from its taxpayers, a parabolic rise in the deficit is INEVITABLE. Worse yet, INTEREST on the National Debt is exploding from the accumulation of large deficits. Currently, that expense category is the 4th largest, just behind Defense Spending. It MUST continue to grow since our National Debt is now growing at a FASTER rate than GDP.
In 2000, the US GDP came in at $9.45 Trillion or 1.65 times the National Debt of $5.45 Trillion. Today, the GDP is $21.03 Trillion and now trails National Debt of $22.15 Trillion. There is absolutely no evidence that the Deficit can be held to the numbers projected by the CBO. There is a significant risk that US Debt Clock numbers will be too low. All it takes is one absurdly expensive program to pass such as “Medicare for All”, “Universal Basic Income”, or “FREE Tuition” and forgiveness of Student Loan Debt of $1.5 Trillion, to bust the irresponsible Piggy Bank wide open. See “Universal Basic Income Made Easy”. (https://markonomics101.com/2018/08/28/universal-basic-income-made-easy-applied-markonomics101/).
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