The CBO projects that the FY2014 budget deficit will be $514 billion, 3% of GDP, and will be just $478 billion or 2.6% of GDP in FY2015. The deficit then begins to rise as a percentage of GDP. A key reason: interest on the debt. While a manageable $233 billion or 1.3% of GDP today, debt service will reach $880 billion by 2024, a whopping 3.3% of projected 2024 GDP.
Tag Archives: deficit
Diminishing Deficit
The US trade deficit was $38.8 billion in August, virtually unchanged from July and has been hovering around $40 billion/month since early 2010. Before the Great Recession, it was about $60 billion/month. The difference, oil imports are down about $20 billion/month due to rising domestic production. Our deficit with China was $29.9 billion last month. Excluding China and oil, we have a surplus of about $10 billion/month with everyone else.
Bearable Budget Battle
The budget deficit is falling rapidly and is now projected to be $642 billion, or 4% of GDP, in FY 2013. It was projected to be $200 billion higher just three months ago. This improvement will delay the next debt ceiling brawl from June to November. And with election season already starting by then, expect substantially reduced political rancor. Despite the improvement, revenues will cover just 81% of federal outlays.
Declining Deficit
The federal deficit peaked at 10.1% of GDP in 2009, and fell to 6.94% of GDP by 2012. The CBO projects that it will fall to $845 billion or 5.3% this year. And, if no policy changes are made, the deficit will fall to 2.4% of GDP by 2015, a decline of 4.54 percentage points. Problem is, that rapid a reduction in the deficit has traditionally resulted in a recession.
Doubling Debt
While per capita debt has ballooned from $1,640 in 1/66 to $53,000 today, it’s the growth rate that matters. Between 1/66 and 10/77 (11.75 years) the debt doubled. It doubled again by 7/84 (6.75 years), again by 10/90 (6.25 years), again by 7/05 (14.83 years) and again by 1/13 (7.5 years). The debt actually grew faster between 10/77 and 10/90 than today. Yet, we survived the debt-soaked 80s!
Gold Medal Tax Insanity
A bill supported by Obama and introduced by Senator Rubio exempting Olympians from paying taxes on their prize winnings, is emblematic of all that ails Washington! These folks don’t deserve special treatment! Our taxes must rise to make up the lost revenue or else we must borrow more from the Chinese. Moreover, it encourages folks to become Olympic athletes. Is there a crying shortage of dressage-riders and synchronized-swimmers?
Deficit Reductions? It looks bad…
9 of the 12 members of the Joint Select Committee on Deficit Reduction, tasked with finding $1.2 trillion in deficit reductions over the decade, have been announced; it looks bad. Because there are 6 Ds and 6 Rs, 1 member must switch sides to reach 7 votes for passage. The best chance of that would be if 1 or 2 senators from the Gang of Six were on the JSCDR, but there are none. Will they be able to agree on a Chief of Staff?
Bond Market Message
Bond markets are sending a strong message! That short term interest rates are higher in Canada than here is testament to the relative strength of their economy. The fact that their long rates are lower than ours suggests their long term fiscal and inflation outlook is also better than ours; they have no yawning budget deficit or debt. The moral, look to the Cold White North for more than just good hockey players.