‘It’s the Spending, Stupid!’

Originally published in Rasmussen Reports, 7/2/2019

The Congressional Budget Office has just released its mid-year update on the federal fiscal situation, and it portends a debt avalanche. But don’t bother to tell Sens. Bernie Sanders and Elizabeth Warren that. They’re busy advocating tens of trillions of dollars in new federal spending.

The new report shows that budget deficits are expected to remain in the $1 trillion territory for years to come. It appears that 13-digit deficits are the new normal in Washington, as spending inexorably keeps rising by hundreds of billions of dollars a year.

This spend-and-borrow forecast ranges from troublesome to panic-room sheer terror — depending on your perspective. I’m in the former, not the latter frame of mind for now — in part because Congress is anticipating a rate of growth of 1.8% annual growth — which is about 1 1/2 percentage points below our historical 3.25% growth. If Donald Trump can continue to grow the economy at a faster pace, the burden of this debt will at least stabilize.

But it is still vitally important to understand how we got into this mess and how we can start to gradually bend the debt curve down.