Notes on US Debt, Deficit, and Economic Projections

America's Debt and Deficit

• The US faces an enormous debt problem.
• The debt is causing massive interest costs each year.
• There's a possibility that it could cause a much worse situation than has been seen.
• The US national debt is about $37,000,000,000,000$.
• The deficit is about $2,000,000,000,000$ (between 1.5 and $2,000,000,000,000$).
• The debt to GDP ratio is worse than it has been since World War II.

Consequences of Inaction

• If Congress and the executive branch do nothing:
  • Interest rates will rise.
  • The buying power of the dollar will decrease.
  • Opportunity for future generations will decrease.
  • Credit agencies will have issues with the US.
  • Moody's was late to the party in drawing attention to the futility that this town had with the inability to ever pass anything of substance.

Evaluation of CBO and JCT Predictions

• In the speaker's experience, scores/predictions by the CBO (Congressional Budget Office) and JCT (Joint Committee on Taxation) have not been accurate.
• Thinking back to the first Trump administration and president Trump's twenty seventeen Tax Cuts and Jobs Act, the CBO and JCT didn't do a good job of rating it accurately.
• They didn't think the US would ever get to 3% growth, but it did.
• The CBO and JCT were off in their revenue assumptions by about $1,500,000,000,000.0$.
• The speaker stated that they don't think through dynamic assumptions with regard to their revenue policies.
• The speaker is familiar with CBO's work when they scored the American Rescue Plan.
• In 2021, the CBO projected inflation to be around 3.3%, in 2022 it was projected to be 2.5%, and in 2024 it was projected to be 2.3%.
• Inflation was higher than projections: 4.78% and 4.1% respectively.

Analysis of the "One Big Beautiful Bill"

• The CBO score projects a growth rate of about 1.8% in the "one big beautiful bill."
• The speaker does not believe this is an accurate growth rate.
• Much of the same policies in the Tax Cuts and Jobs Act (TCJA) led to 2, 3, and 4% growth, yet the CBO is scoring the current bill at 1.8%.
• The speaker thinks the budget resolution that was passed, at 2 and a half trillion dollars, 2.7, was much more accurate in terms of a number that should flow from the policies in the bill.
• The house budget committee put forth an estimate of 2.6%, which is considered a better estimate.
• Assuming only the 1.8% CBO number both underestimates the positive impact of the legislation and simultaneously overestimates the negative impacts like deficit projections.
• The speaker thinks the challenge with the CBO scores is that the way they construct the baseline is they are asking policymakers who care about the debt and deficits to almost take the position that you shouldn't extend the tax relief, and then they don't model the extent to which that would implode the economy.
• There are dynamic assumptions with regard to tax policies and economic growth, and then there should also be an area where they model the economic impacts of their own baseline policies.