At this stage, what more can be said about the fiscal state of the US government? The Congressional Budget Office, also known as the CBO, published its updated 2024-2034 economic and budget outlook. The numbers were not pretty, to say the least. The report gazed into the future and determined that fiscal discipline will never be restored, no matter who is running the country. Let’s venture into the fiscal black hole and try to return from the abyss.
CBO Looks at Debt, Deficits
According to the CBO, the fiscal year 2025 budget deficit will be $1.9 trillion, up from the February estimate of $1.5 trillion. Despite all of the tax policy promises coming from the White House, the CBO projects the federal shortfall will spike to $2.8 trillion in the next decade. Cumulatively, deficits will be $22 trillion, lifting the national debt to above $50 trillion and swallowing 122% of the national economy.
But while one side of the aisle blames this on a lack of revenue, the CBO’s reality offered a different take. By 2034, the US government will spend more than $10 trillion a year while taking in about $7 trillion. How is it possible for a government to generate record tax receipts and still post massive shortfalls? One of the reasons is interest payments. Debt-servicing costs will officially top $1 trillion next year and rocket all the way to $1.7 trillion. This will account for one-sixth of all federal outlays. On a cumulative basis, interest charges will surpass $13 trillion. Ouch!
Responsible observers conceded that the CBO numbers depict a fiscal landscape that is deteriorating. “The harmful effects of higher interest rates fueling higher interest costs on a huge existing debt load are continuing, and leading to additional borrowing,” said Michael Peterson, CEO of the Peter G. Peterson Foundation, in a statement. “It’s the definition of unsustainable.”
Others, meanwhile, could not help but lay the blame on former President Donald Trump.
Laffer Curve Is Right
After the CBO updates were released, the current administration pounced on the news and issued various statements claiming that the outlook confirms the sea of red ink is the presumptive Republican presidential nominee’s fault. Why? The Tax Cut and Jobs Act. But while the non-partisan budget watchdog has been highly critical of the Trump-era tax cuts, projecting a $3.3 trillion net contribution to deficits if they are extended, officials have adjusted their figures in recent months.
In previous reports, the CBO has said that the former president’s landmark legislation would result in a $1.1 trillion decrease in revenues from 2018 to 2027. However, the entity calculated a $600 billion jump in receipts in updated numbers. Additionally, the June 2024 outlook assumed that the tax cuts will not be extended in 2025. So, should this policy expire next year, revenues should skyrocket, right? Not quite. The CBO forecasts that there will be “little change” in revenues as a percentage of GDP after 2027.
Remember, federal revenues have climbed 33% since 2018, allowing Washington to collect record amounts of dollars and cents from taxpayers. By comparison, outlays soared 49% in the same span. Put simply, once again, this is proof that the Laffer Curve works. Of course, what does not work is spending more than what Republicans and Democrats confiscate every year.
Since their inception, the Bush and Trump tax cuts have successfully bolstered economic growth and enhanced government coffers. But if you are putting wars on credit cards, expanding entitlements, and generating inflation that leads to higher interest rates, it will be challenging for public policymakers to keep their heads above water.
The Death of CBDCs?
ESG (environment, social, and governance) is going the way of the dinosaurs. DEI (diversity, equity, and inclusion) is dying a slow death. Are CBDCs (central bank digital currency) next on the chopping block? Central banks have become increasingly skeptical that they will be able to implement digital currencies in the future, likely driven by widespread opposition in the digital and brick-and-mortar town square.
According to a new study by the Business of International Settlements (BIS), fewer institutions anticipate retail central bank digital currencies in the next few years. This does not mean that the entire concept will be eviscerated. The BIS survey results show central banks are still expecting wholesale CBDCs in the coming years. Wait a minute. What’s the difference? A retail CBDC is used by the general public, and a wholesale CBDC is utilized by banks and other financial institutions for payments and securities transactions.
Still, considering that central banks have not been as popular as the anointed expected, the globalists might be a bit more apprehensive about erecting a prison planet filled with CBDCs, social credit scores, and accelerated surveillance. Perhaps the rumors of CBDCs’ death have been greatly exaggerated. With enough fingers crossed, the gossip will become fact.
