Gene Epstein of Barron’s warns readers about a fiscal crisis “looming” beyond present-day debates over the federal debt ceiling.
Isn’t this a heck of a way to run a government? Since everyone knows the debt ceiling will get raised anyway, why not reform a system that has brought disruptive shutdowns?
Maybe the recurring trauma does some good, however, by helping to raise awareness of the real trauma if the government keeps delaying the radical steps required to curb its soaring debt. Or maybe not. Repeated warnings from the nonpartisan Congressional Budget Office about a debt-fueled “fiscal crisis” have been ignored.
In the CBO’s recent monthly budget review for August 2017—the 11th month of the 2017 fiscal year—the agency estimated the deficit in fiscal 2017 at $693 billion, up from $585 billion in fiscal 2016. Trump’s predecessor used to make much of the fact that the deficit had been “cut” by comparing it with the recession-plagued years when the annual deficit kept topping a scary $1 trillion. In any case, in the CBO’s baseline 10-year projections released in June, it foresaw a rise in deficits to the point that, by 2022, $1 trillion deficits and then some will be the yearly norm.
We might try to shrug off these potentially daunting figures by noting that gross domestic product already runs more than $19 trillion, and will continue to climb. But annual deficits keep swelling the federal debt at a faster pace than the growth of GDP. At present, debt held by the public runs 77% of GDP, the highest share since the years immediately following World War II. And according to the “extended baseline” projections the CBO released in March, the ratio will reach 113% of GDP by 2037 and 150% by 2047, at which point “it would be on track to grow even larger.”
