This is an opinion column.
The Congressional Budget Office (CBO) projects a $1.4 trillion federal budget deficit for 2023 as annual deficits over the 2024–2033 period average $2.0 trillion. Buried in a recently-released wonky government report, Congress’s non-partisan fiscal forecaster predicts our pandemic-level deficit spending won’t slow down. Our political class is playing a shell game, and most of us are the suckers who sit down at the table.
If CBO’s “Budget and Economic Outlook: 2023 to 2033″ doesn’t sound like a thrilling read, you must have a pulse. Nobody wants to talk about America’s fiscal future. The discussion carries the same appeal of a redneck mankini contest or a bite of jellyfish jerky. Why would we want to focus on the five alarm fire in America’s fiscal house when we can prioritize the looming menace of drag shows or the dangerous ideas of CPAC speakers?
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As I’ve previously explained, we have a spending problem first. That’s the precise minute every Democrat tunes out. Don’t worry, they’re already gone. The rest of you still reading aren’t shocked by the idea that our political class might overspend…all the time. Just as I’ve warned Republicans of surrendering environmental policy to Democrats, liberals shouldn’t view spending restraint as a Republican virtue.
In fact, most Republicans are horrific when it comes to spending and only seem to focus on it when Democrats are in the government’s driver’s seat. Annual deficit spending increased every year under Donald Trump’s administration.
Then COVID-19 hit.
An unfamiliar pandemic, panicked policy responses, and a spend-happy Congress combined into a financial and economic nightmare. In 2020, the federal government basically spent two normal years worth of cash in one. The story wasn’t much different in 2021 which saw the second highest annual deficit in American history.
We’ve come off the spending high, but we haven’t come off enough. We’re offering cocaine to drug addicts coming off a LSD high and acting like we’re making progress. If we keep the current policy baseline, CBO sees insane deficits far into the future.
Democrats suggest the answer is taxing billionaires. It’s a great political talking point which routinely baits Republicans into defending people with yachts, but that’s about it. Forbes reports “735 billionaires worth a collective $4.7 trillion” in America as of 2022. Ignore, for a moment, that much of that wealth is held in companies or other illiquid assets. Even if Democrats confiscated the entirety of that wealth, we’d balance our budget for a little more than two years.
Even the most liberal elected officials aren’t going to do that or anything close to it because they don’t want to wreck the economy. Democrats in Congress are already being cagey about Biden’s forthcoming budget which will include tax increases. Accompanied with Biden’s pledge not to raise taxes on families making less than $400k, we can’t and aren’t going to tax our way to fiscal sanity.
So, to borrow from my sons, let’s stop the cap.
CBO does project inflation will return to the Federal Reserve’s targeted levels…in 2026. That’s almost entirely due to increases in the federal funds rate which essentially cools credit lending and reduces inflation. CBO projects the Federal Reserve will increase the federal funds rate to 5.1 percent by the end of March and keep it there through late in the year.
While inflation should continue to decline over the next few years, employment opportunities will also suffer. Less credit in the economy puts downward pressure on growth. CBO predicts unemployment rising to 5.1 from 3.6 percent in the fourth quarter of 2023.
This is why nobody reads the CBO’s budget and economic forecasting. Taking out the politics, chewing on reality, and trying to develop reasonable solutions is a lot less fun than spending like you’re drunk and blaming the other guy.
But the comedy of the American political shell game is richer still. I’ll give you an easy recent example.
Democrats clamor to soak the rich. Republicans say we can’t do it. If Republicans win, nothing changes for the ultra wealthy. Even if Democrats manage to marginally raise taxes , Democrats and Republicans just spent billions on massive subsidies to bring more of the microchip industry to America. Are we really going to ignore the fact that such policies make millionaires and billionaires a lot of money off the American taxpayer?
We take money from one hand and give it right back to the other for the general welfare of the American people. The only real difference between a Republican and Democrat is that Republicans don’t see the point of laundering money through the government to end up at the same place.
On a more positive note, CBO will give us a spin-free play-by-play of the American economic decline in regular, inconvenient, reports that nobody reads.
Smith is a recovering political attorney with four boys, two dogs, a bearded dragon, and an extremely patient wife. He engages media, business, and policy through the Triptych Foundation and Triptych Media. Please direct outrage or agreement to email@example.com or @DCameronSmith on Twitter.