In June the Congressional Budget Office released a report titled The 2018 Long-Term Budget Outlook. It projects a national debt larger than GDP by the late 2020s, just 10 years in the future. That hasn’t happened since the 1940s
Worse, they project that it will climb to 152 percent of GDP by 2048, far higher than it has ever been in all of American history.
And worst of all, this is the optimistic scenario, one that assumes last year’s tax cuts for very-high-income individuals are allowed to expire. The tax law made big cuts for corporations permanent, but made those on rich individuals temporary in order to get the bill through the Senata under fillibuster-proof “reconciliation” rules.
If the tax cuts are made permanent, as at least some Republicans in Congress advocate, the debt will expand even faster and total more. And obviously the debt would be much lower if the previous tax rates had simply been left alone to start with. Those rates were essentially the same as the ones in force during most of the 1990s, the longest period of economic expansion in American history. They were also the tax rates through most of the economic expansion that began under President Obama and is still continuing.
Last year Republicans rushed through their damaging tax cut bill by ignoring congressional norms for major legislation, without even holding hearings, and in a mad dash before seating the new Democratic senator from Alabama. I hope there are fiscally responsible Republicans left who now realize their mistake in believing the tax cuts would pay for themselves, a perennial claim that has yet to come true.
For a summary of the specific problems with the tax cut bill, see Paul Krugman’s December 21 piece from The New York Times. See also this June blog post by Kevin Drum titled “CBO: Republicans Have Blown Up the National Debt Again.”
As Drum points out in that post, the national debt grew at a faster rate under Reagan and the two Bushes than under Obama despite the fact that Obama took office with the economy in free fall and resorted to a deficit stimulus to ward off a threatened major depression. Under Clinton, of course, the budget reached record levels of surplus, allowing the dollar value of the national debt (not just the debt-to-GDP ratio) to be reduced for the first time since Lyndon Johnson’s final budget. In fact, when Clinton left office, the debt was on track to be paid off in less than a decade. That dream was cut short by George W Bush’s two rounds of tax cuts for the well off along with other things financed entirely by borrowing, such as the was in Iraq and a new Medicare drug benefit that was very helpful to seniors but was adopted with no notion of how to pay for it.