As a nation, we have become addicted to budget deficits.
Each year, we have to borrow fund government operations. And most people, including our legislators, do not seem to care or take notice.
As readers realize, a budget deficit occurs when expenses exceed revenue. Accrued deficits form the national debt. Thus, the national debt is nothing more than an accumulation of budget deficits.
A new study by the Congressional Budget Office (CBO) projects the budget deficit for the current fiscal year ending Sept. 30 to be $3 trillion, or $8,932 per person. The CBO is a nonpartisan federal agency within the legislative branch of the U.S. government that provides budget and economic information to Congress.
While the projected budget deficit for fiscal year 2021 is nearly $130 billion less than the deficit recorded in 2020, it is triple the shortfall recorded in 2019. This year’s deficit is projected to total 13.4 percent of gross domestic product (GDP). This makes it the second-largest since 1946, exceeded only by the 14.9 percent shortfall recorded last year.
Most readers understand why the inordinate deficits arose during the last two years. They occurred because of the economic disruption created by the coronavirus pandemic and the injection of trillions of dollars to fight the ensuing recession. It should be noted, however, deficits were already large by historical standards before the pandemic.
The deficits have added to the nation’s debt. Debt held by the public — which stood at $21.0 trillion, or 100 percent of GDP, at the end of 2020 — will total $23.0 trillion, or 103 percent of GDP, at the end of 2021. The public debt represents the principal amount of marketable and non-marketable Treasury securities currently outstanding. They are held by individuals, firms, and other nations.
As recently as 2007, at the start of the previous recession, the debt equaled only 35 percent of GDP. The CBO projects it will dip just below 100 percent between 2023 and 2025 before rising again, reaching 106 percent in 2031. This is about the same as the percentage recorded in 1946 — the highest in the nation’s history — at the end of World War II.
Large and sustained federal budget deficits are harmful to the fiscal health of the United States. Yet policymakers struggle with containing the red ink. Even in times of economic growth, the federal government has run large and growing budget deficits. This cannot continue indefinitely.
The Thomasville Times