BETTER BUDGETING

The FY24 budget deficit was $1.8 trillion, 6.4% of GDP. Keeping the debt-to-GDP ratio flat requires the deficit not to exceed nominal GDP growth. Assuming that’s 4%/year, the deficit shouldn’t exceed $1.2 trillion in FY25, a decline of $600 billion or 8.9% of spending, a huge amount. Keeping the budget unchanged for one year would reduce the deficit by $270 billion, for two years roughly $600 billion. Hard, but doable.