The Congressional Budget Office just released a bomb with their latest projections for the federal budget deficit. They’re projecting a federal budget deficit of nearly $2 trillion for fiscal year 2024. That’s about $400 billion more than what they projected just four months ago in February, marking a 27% increase. TCS President Steve Ellis is joined by TCS Director of Research and Policy, Josh Sewell for the bomb damage assessment.

Transcript

Announcer:

Welcome to Budget Watchdog All Federal, the podcast dedicated to making sense of the budget spending and tax issues facing the nation. Cut through the partisan rhetoric and talking points for the facts about what’s being talked about, bandied about and pushed to Washington, brought to you by taxpayers for common sense. And now the host of Budget Watchdog AF TCS President Steve Ellis.

Steve Ellis:

Welcome to All American Taxpayers Seeking Common Sense. You’ve made it to the right place for over 25 years. TCS that’s taxpayers for common sense, has served as an independent nonpartisan budget watchdog group based in Washington DC We believe in fiscal policy for America that is based on facts. We believe in transparency and accountability because no matter where you are on the political spectrum, no one wants to see their tax dollars wasted. It’s June, 2024 and today we are here to discuss the latest bombshell report from the Congressional Budget Office on the Federal Deficit and Debt. Joining us now to break down the numbers and implications is TCS Director of Research and Policy, Josh Sewell. Josh, welcome back to the pod.

Josh Sewell:

Hey, thanks Steve. I’m always happy to be here.

Steve Ellis:

Alright, let’s just dive in. Josh. As I mentioned, the CBO just released a bomb with their latest projections for the federal budget deficit and looming debt. What’s the new forecast for fiscal year 2024?

Josh Sewell:

Well, Steve, the CBOs latest report is in fact a bombshell. So they’re projecting a federal budget deficit of nearly $2 trillion for fiscal year 2024. That’s about $400 billion more than what they projected just four months ago back in February. That’s a 27% increase. Now, it’s also worth noting that the only reason it’s not quite $2 trillion is due to a technicality. So the fiscal year started on a weekend, so some payments were made in fiscal year 2023 to get ahead of that instead of on Monday in the next fiscal year. So $2 trillion is our annual deficit,

Steve Ellis:

Which is piling onto the debt. And Josh, that’s a staggering increase in such a short period of time. I mean, just a few months it went up that much. What about the longer term outlook? What are we looking at for the next decade?

Josh Sewell:

Well, things don’t get any easier. I mean the 10 year outlook is just as concerning. So from fiscal year 2025 to 2034, which is that 10 year window, the CBO is projecting a total deficit of 22.1 trillion. So that’s 2.1 trillion or 10% more than what was projected just a few months ago. Again, there’s a theme. Things get bigger just a few months after reevaluating. And what’s driving these numbers are increased spending on disaster relief, student loan forgiveness, foreign assistance, and higher interest rates. It’s a perfect storm for an exploding national debt.

Steve Ellis:

Well, speaking of storms, they’re predicting a more active than normal season. We’ve already had a named storm or maybe even two named storms. And so that also actually ends up adding to that deficit this year if we have to do some disaster leave, right?

Josh Sewell:

Yeah, exactly. Disasters are something you cannot predict. I mean, we expect there’s going to be some kind of disaster every year somewhere, but exactly how acute it is and exactly how much it costs is something that’s hard to predict. But when it happens, you think of when Hurricane Katrina happened, you think of other Superstorm Sandy, you think of some of these years, huge amounts of money can be spent and some amount will definitely, but some years, tens of billions in disaster relief is going to come out.

Steve Ellis:

Yeah, I mean you think of more recently than those, these 2017 with Harvey, Irma, Maria, and those certainly rack up the debt. So going back to the numbers, I mean these are pretty eye watering. Bring tears to the eyes, Josh. How does this compare to historical trends? Are we in uncharted territory here?

Josh Sewell:

Yeah, we are. And that’s one of the things that’s really concerning for me is when you look at the numbers, this is something we have not experienced, not just recently, but as far as we can tell perhaps ever in the history of our country. So if you look at the CBOs projections, total deficits equal or exceed 5.5% of GDP gross domestic product every year from 2024 to 2035. So that means the gross domestic product is essentially our entire economic output as a country. So to put that in perspective, since at least 1930 deficits have not remained that large for more than five years in a row. So over the past 50 years, the total annual deficit has averaged only 3.7% compared to that 5.5%.

Steve Ellis:

Alright, Josh, so let me stop you there and let’s unpack that a little bit. So CBO is saying that it’s going to be over 5%, five and a half percent every year for the next decade, whereas in the last 90 plus years, they actually haven’t been that large for more than five years in a row, right? Is that’s what you’re saying?

Josh Sewell:

Yes, exactly. The issue here is that yes, we run a deficit as a country in almost every year. There’ve been very few years in the last 50 certainly where we’ve had an annual surplus, but the debt goes down as a percentage of GDP when times are good, that’s not happening right now. It’s staying high and actually increasing because remember the economy is growing as well. So the fact that the annual deficit is staying at that high 5.5% level means it is growing as our annual GDP is growing as well.

Steve Ellis:

And let’s be clear, the nation has had a debt basically every year of our existence, with the exception of a few years back when Andrew Jackson was president in the early part of the 19th century. But there’s a cost of that debt and that’s servicing the interest on that. Talk about that a little bit.

Josh Sewell:

Yeah, sure. So since 1940 net outlays, that means what we spend for interest has never exceeded 3.2% of GDP. So that means in one year we’ve never spent so much on interest, which is just paying interest on our existing debt above 3.2% of GDP. But in the CBOs most recent baseline from earlier this month, those outlays exceed that 3.2% percentage every single year from 2025 to 2034. So we’re looking at, again, it’s a fiscal situation unprecedented in modern American history, maybe all of American history,

Steve Ellis:

And this is the interest that we’re paying. So this is money that’s just going out the door to service the debt. We’re not getting any benefits from it. We’re not getting any, it’s not paving any roads. It’s not spending money on defense. And speaking of defense budget, watch, hug AF have heard us talk about the huge defense budget, but the deficit is set to exceed the defense budget this year. Right?

Josh Sewell:

It’s something I did not think I would see when I started working in dc. We’re spending nearly a trillion dollars on defense, but we’re going to spend more than that just servicing our debt soon.

Steve Ellis:

And we keep talking about it from 2025 to 2024, but that’s because CBO really only looked at a decade. So it doesn’t mean that all of a sudden things are all great starting in 2035. So this is certainly alarming, Josh, and given these projections, what do we taxpayers for common sense think needs to be done to address this fiscal crisis?

Josh Sewell:

Well, clearly we need to do something different. Probably a lot of things different. So the current trajectory is frankly, it’s just unsustainable. That’s just math. So whether it’s cutting, spending, raising taxes, or honestly a combination of both. Something’s got to give. And that’s why sometimes we don’t have a lot of faith in Washington. But that’s why we have supported the creation of a bipartisan bicameral fiscal commission that can recommend the hard choices and policy shifts to put the country on the right track

Steve Ellis:

Because these are some of those lightning rod third rail type of issues. We’re talking about Medicare, we’re talking about social security, we’re talking about raising revenue. I mean all of those. And those are things that where this independent commission could actually, that’s like you said, bipartisan bicameral that can make some of these tough recommendations and then basically put that in front of Congress and force Congress to vote it up or down. And that’s something where we’re not necessarily a huge fan of commissions, but it hasn’t happened yet. And so what are we hoping to get out of this commission? I mean, are we going to be able to balance the budget?

Josh Sewell:

No, we’re not that optimistic. We’re not talking about eliminating the debt. And honestly, I don’t think even balancing the budget is reasonable because of the hole that we’ve dug ourself into. Like you said, we’ve been in debt since the foundation of our country. So debt in of itself isn’t necessarily the problem. It’s how large the debt has become and the trajectory that it’s going to get larger and larger with no foreseeable change. Right now we just want to see shrinking of the debt as a percentage of gross domestic product. This should be achievable. So it’s not a huge burden on the economy. We’re not agents of austerity saying we now need to cut everything 25% and balance the budget in the next 10 years. We just need to turn this big fiscal ship towards the shores of sanity. And so the longer policymakers wait to address these issues, the harder it becomes. Right? We know this. We’ve been avoiding these issues for a long time. The longer you avoid them, the harder it gets. So this should be pretty common sense and

Steve Ellis:

Has pointed that out, particularly when I was talking about the major entitlement programs. I mean, the longer you wait to kind of put those in a better sound or fiscal footing, the harder it is the more stark the changes have to be. And so that’s something that is, you realize that the people who are saying keep your hands off of social security are the ones that are actually going to be responsible for cutting the program where it’s only paying 75% of the benefits in just a few years time.

Josh Sewell:

And that’s the kind of assessment you need. We need ourselves and listeners and lawmakers to have on every part of the budget. You have the parts that you like, the parts of the government you love to spend on, but we have to start making choices. And it’s easier to make adjustments when you have numerous years and even decades to do it. As opposed to doing it when you’re forced to, which is what I fear is going to happen. If we don’t start being real on the debt and our annual deficits, which make that debt, then it’s going to be really, really tough. Not just for my kids, but for me as well.

Steve Ellis:

Yeah, you’re not that old. I’m only a little ways away from social security, less than a decade. So, alright, this is such an important topic. I think we don’t want to belabor the point. We want to just hit it that this is this huge issue and it’s something that has to get dealt with and it’s going to have to be dealt with in this next presidential cycle. Whoever is president, they’re going to have to lead on this. Josh Sewell, thank you for the bomb damage assessment. A I

Josh Sewell:

Captain.

Steve Ellis:

So there you have a podcast listeners. The CBO was wide by a mile, and taxpayers are on the hook. This is the frequency market on your dial, subscribe and share and know this taxpayers for common sense has your back America. We read the bills, monitor the earmarks, and highlight those wasteful programs that poorly spend our money and shift long-term risk to taxpayers. We’ll be back with a new episode soon. I hope you’ll meet us right here to learn more.