Bill4DogCatcher.com sez: some folks dismiss future debt as something that we can deal with when we get there. This mentality has a very agnostic fanbase. It doesn’t matter whether the we-can-pay-it-later brush of hand comes from the left or right, or even if the dismisser is supposedly fiscally conservative; example: Vice President Cheney once brushed off the topic with “Reagan proved deficits don’t matter”. I love Reagan but Reagan started the immense national debt snowball that has engulfed us today.
Deficits do matter. When just the annual interest payment on that debt hits $723B per year … ouch. President Obama signed an increase in our national debt by $1.9 trillion on February 12th and then signed the 2010 Pay-as-you-go (PAYGO) Act the next day. We cannot keep giving lip service to PAYGO. Congress passed PAYGO in 2007 as a guideline, not as as Act, and then promptly forgot about it — never once meeting PAYGO standards.
Accumulating deficits are pushing federal debt to significantly higher levels. CBO projects that total debt will reach $8.8 trillion by the end of 2010. At 60 percent of GDP, that would be the highest level since 1952. Under current laws and policies, CBO’s projections show that level climbing to 67 percent by 2020. As a result, interest payments on the debt are poised to skyrocket; the government’s spending on net interest will triple between 2010 and 2020, increasing from $207 billion to $723 billion.
The Congressional Budget Office projects that if current laws and policies remained unchanged, the federal budget would show a deficit of $1.3 trillion for fiscal year 2010. That amount would be slightly smaller than the 2009 deficit but, as a share of the economy as a whole (measured by gross domestic product, or GDP), it would still be the second largest since World War II. The budget picture remains daunting beyond this year, with deficits averaging about $600 billion annually from 2011 through 2020.
Those estimates are not intended to be a prediction of actual budget outcomes; rather, they indicate what CBO estimates would occur if current laws and policies remained in place. Toward that end, CBO’s projections presume no changes in current tax laws or spending programs. Any new legislation that reduced revenues (such as indexing the alternative minimum tax for inflation) or boosted spending (such as providing supplemental funding for military operations in Afghanistan) would increase projected deficits. For example, if all tax provisions that are scheduled to expire in the coming decade were extended and the AMT were indexed for inflation, deficits over the 2011–2020 period would be more than $7 trillion higher. (See the above chart for details on the budgetary impact of some alternative policy actions and see the sidebar for more information on CBO’s baseline.)
This post by Bill Golden, aka Bill4DogCatcher.com, an independent observer of American political life, economics, and workforce issues.