US Will Add $19 Trillion in Debt Over Next Decade: CBO

US Faces Debt Default as Soon as July: CBO

The U.S. will default on its obligations sometime between July and September if the federal debt limit is not raised or suspended, the Congressional Budget Office said in a new estimate published Wednesday.

The latest CBO projection provides a new baseline for lawmakers as they wrangle over raising the debt ceiling, with Republicans insisting on spending cuts as a precondition for doing so, even as President Joe Biden insists that Congress raise the limit without any strings attached.

The U.S. hit the $31.4 trillion statutory limit on the national debt in January, forcing the Treasury to start taking what it calls extraordinary measures to make all of its payments in full and on time. The so-called X-date — the day on which those extraordinary measures are exhausted and the federal government can no longer meet all of its obligations — will arrive at some point in the fourth quarter of the current fiscal year, according to the new estimate, but the CBO did not provide a specific day.

Previously, the Treasury Department estimated that the X-date could arrive as soon as June 5. While declining to name a specific day, CBO did say that the X-date could arrive before July, depending on how robust tax receipts are in April. One potential source of a shortfall in revenues is capital gains taxes, which have been strong in recent years but are projected to soften as the economy slows.

Yellen warns again: Treasury Secretary Janet Yellen has warned of the dire results that could follow if the nation defaults on its debts, in whole or in part. “In my assessment — and that of economists across the board — a default on our debt would produce an economic and financial catastrophe,” Yellen said at a meeting of county leaders in Washington earlier this week. “Many of your residents could ultimately lose their jobs.”

Yellen also advised Congress to act sooner rather than later. “Let’s not wait until the last minute,” she said. “I believe it is a basic responsibility of our nation’s leaders to get this done.”

Analysts at the Bipartisan Policy Center, which provides its own estimate of the X-date, have echoed that view, arguing that lawmakers should act well before the default date gets close. “In this past, some have misinterpreted the window . . . as a safe range to forestall default. This interpretation, however, is a misreading,” the non-partisan think tank said in January. Instead, BPC maintains that “policymakers must act before the beginning of the X Date range—ideally well before—if they wish to responsibly protect the U.S. and global economies.”

US on Pace to Add $19 Trillion to National Debt Over Next Decade: CBO

Federal finances are deteriorating more rapidly than expected, the Congressional Budget Office said Wednesday as it released its 10-year outlook for the federal budget and the U.S. economy.

The 101-page report finds that the gap between spending and revenues is growing faster than previously estimated, thanks in part to new legislation, with the 2023 deficit projected to come in at $1.4 trillion, rising to $2.7 trillion in 2033. The cumulative deficit is now projected to total $18.8 trillion over the next 10 years, which is $3 trillion more than the CBO projected just last spring.

Measured as a percentage of the economy, the deficit will equal 5.3% of gross domestic product in 2023, a number that will bounce higher over the next decade, reaching 6.9% in 2033 — a level of deficit spending that has been seen only five times since the end of World War II, CBO said.

Debt held by the public will rise, as well, up from the current 98% of GDP to 118% of GDP by 2033 — an increase of roughly two percentage points a year, and reaching the highest level ever recorded. Assuming no changes are made to the current trajectory, that number will keep rising, hitting 195% of GDP in 2053.

CBO warns of sharp rise in entitlement spending: The leading drivers of deficit growth are on the mandatory spending side of the budget, including Social Security and Medicare, as well as growing interest payments on the national debt. Outlays for Social Security will roughly double, rising from $1.2 trillion in fiscal 2022 to almost $2.4 trillion in 2033. Medicare spending will more than double, rising from $710 billion in 2022, to more than $1.6 trillion in 2033 — at which point it will account for 4.1% of all spending in the economy, CBO said.

Altogether, the rising deficits will help push the national debt to roughly $50 trillion by 2033.

Firing up the debate: The report will provide plenty of fuel and perhaps some urgency to the burgeoning battle over spending levels in next year’s budget and beyond. Although CBO does not provide advice on how best to alter the current fiscal trajectory, CBO Director Phillip Swagel said Wednesday it’s clear that something must change.

“Over the long term, our projections suggest changes in fiscal policy must be made,” Swagel told reporters. “The fiscal trajectory is unsustainable. Our spending is outpacing our revenue. At some point, something has to give.”

Lawmakers sparred over the implications of the report, with Republicans focusing on spending. “Today’s report from the non-partisan CBO shows the damage of Democrat spending on the national debt is worse than we thought,” said House Budget Chairman Jodey Arrington (R-TX). “House Republicans must rein in the unbridled spending and restore fiscal sanity in Washington before it’s too late.”

Democrats, on the other hand, focused on revenues. “Decades of Republicans’ unpaid-for tax cuts for the mega-rich and well-connected have added trillions to the debt, deprived the economy of needed revenue, and failed to deliver their promised benefits for the economy or American workers,” Rep. Brendan Boyle (PA), the top Democrat on the House Budget Committee, said in a statement. “Democrats will not be lectured about fiscal responsibility by the same Republicans who drove up the deficit and are now holding our entire economy hostage by refusing to pay the bill.”

In a statement, Maya MacGuineas of the nonpartisan Committee for a Responsible Federal Budget, which advocates for reducing deficits and debt, said the report should inject a “dose of reality” into the debate in Washington.

“It’s time for policymakers to stop grandstanding and demagoguing these important issues and wake up to the reality: we will need to make changes to spending on Social Security, Medicare, and other programs, and we need to raise the necessary revenue to fund them,” she said. “Everything should be on the table to get our unsustainable fiscal problems under control.”

Biden Says GOP Would Add Trillions to the Debt

As the Congressional Budget Office projected a worsening fiscal outlook, President Joe Biden on Wednesday sought to portray his economic plans as both successful and fiscally responsible and draw a contrast with Republicans, whom he painted as hypocritical and irresponsible.

In a speech before the IBEW Local Union 26 in Lanham, Maryland, Biden said his forthcoming budget plan would reduce the deficit by $2 trillion over 10 years while protecting Social Security and Medicare. By contrast, he claimed that Republican economic plans would add $3 trillion to the nation’s debt.

Biden this week has continued his attacks on Republican lawmakers, whom he has criticized repeatedly since his State of the Union address last week for proposals that he said could threaten Social Security and Medicare.

House Republicans say they are aiming to balance the federal budget within a decade. In speeches Tuesday and Wednesday, Biden called new House Speaker Kevin McCarthy (R-CA) a “decent guy.” But he said that McCarthy made clear his agenda when they met recently. “He says he’s not going to raise any taxes at all on anybody. He just wants to cut programs,” Biden said Tuesday.

On Wednesday, Biden touted his plans to grow the economy and cut the deficit, in large part by raising taxes on the wealthy. He contrasted that approach with a GOP agenda that he labeled “top-down, trickle-down economics.”

The president said that Republicans should lay out their budget proposals as he plans to next month and the two sides could then compare their blueprints. Biden insisted that GOP legislative proposals would leave a gaping fiscal hole.

Biden criticized Republicans for slashing IRS funding and defended the money Democrats for the agency last year to crack down on tax cheats. And he said that Republicans want to extend their 2017 tax cuts and that doing so without paying for it would add another $2.7 trillion to deficits while giving a $175,000 tax cut to people making over $4 million a year.

“It would explode the deficit and leave the American taxpayer holding the bag,” Biden said. “Look folks, let’s be crystal clear about what’s happening. If you add up the proposals that my Republican friends have offered just so far — they’ve offered these now — it would add more than $3 trillion to the debt over 10 years.”

Biden and Democrats will look to keep some of those 2017 tax cuts benefitting lower- and middle-income households. The president has pledged repeatedly not to raise taxes on anyone making less than $400,000 a year.

The bottom line: Biden is trying to flip the “fiscal responsibility” script so often used by Republicans who criticize Democrats for “runaway government spending.” He plans to roll out his budget on March 9.

As Haley Kicks Off Presidential Bid, Trump Attacks on Social Security and Medicare

Nikki Haley, the 51-year-old former governor of South Carolina and U.S. ambassador to the United Nations in the Trump administration, officially jumped into the 2024 presidential race Wednesday with a rally in Charleston, South Carolina.

“We’re ready to move past the stale ideas and faded names of the past, and we are more than ready for a new generation to lead us into the future,” Haley said. She also called for mandatory “mental competency tests” for politicians over age 75. President Joe Biden is 80 and former president Donald Trump is 76.

Trump, who was the first Republican to launch a 2024 presidential bid, hit back quickly, as is his style. The former president’s campaign put out a press release titled “The Real Nikki Haley” slamming the new rival in the field for past support for Social Security cuts and turning Medicare into a voucher system.

“Trump has leaned into attacking his current and potential 2024 rivals on entitlements, looking to exploit divisions in the Republican Party over the issue — just as President Biden and the Democrats are doing,” Nathaniel Weixel writes at The Hill.

Trump has publicly warned Republicans against cutting Social Security and Medicare. Weixel notes that Trump broke from GOP orthodoxy on entitlement programs when he first ran for president and pledged to “save Medicare, Medicaid and Social Security — without cuts” — but that, once in office, Trump proposed cuts to those programs in his budgets.

The bottom line: While President Biden has been attacking Republicans over plans that could threaten Social Security and Medicare benefits, the future of those programs could be a potent issue in a hotly contested 2024 Republican presidential primary contest. As The Washington Post’s Isaac Arnsdorf wrote recently: “The emphasis reflects potential vulnerability for Republican rivals who were elected to powerful posts in the pre-Trump tea party era, embracing austerity in the last showdown over raising the federal debt limit.”

• U.S. on Track to Add $19 Trillion in New Debt Over 10 Years – New York Times
• CBO Warns of Sharp Uptick in Social Security, Medicare Spending – The Hill
• U.S. Faces Debt Limit Deadline Between July and September as Deficit Rises – Washington Post
• Biden-McCarthy Budget Challenge Worsens on New CBO Estimates – Bloomberg
• As Lawmakers Spar Over Social Security, Its Costs Are Rising Fast – New York Times
• Biden Says GOP Plans Would Drive US Debt Up by $3 Trillion – Associated Press
• Biden, Democrats Ramp Up Attacks on Republicans Amid Debt Limit Standoff – Washington Post
• Lawmakers Seize on Spy Balloon to Inflate Defense Spending – Politico
• Retail Sales Jump 3% in January, Smashing Expectations Despite Inflation Increase – CNBC
• Senate Democrats Unveil Resolution Condemning Republicans’ National Sales Tax Proposal – The Hill
• Distrust Over GOP Plans for Social Security, Medicare Marks Rocky Start to Budget Talks – The Hill
• Club for Growth Defends Rick Scott From McConnell’s ‘False Attacks’ – The Hill
• Bernie Sanders Calls Moderna CEO to Testify on Proposed Vaccine Price Hike – Washington Post