You can talk always talk about today’s politicians fiddling while Rome burns, and never be far from the truth. That’s because the US is heading for an unprecedented fiscal calamity, which CBO’s latest long-range fiscal outlook proves beyond a shadow of doubt.
Based on current law and a still overly optimistic economic forecast, the mother of all budget gaps is now starring the Imperial City straight in the eye. Total outlays — including soaring interest costs as bond yields normalize — are heading for 28% of GDP during the next 30 years, while current tax law will keep receipts at just 19.5%.
In point of fact, however, even that huge budget gap is way too optimistic. Per its Congressional instructions, CBO is required to assume that the $250 billion annualized tax increase between 2022 and 2027 built into current law (owing to expiration in 2026 of the ballyhooed individual rate cuts and doubling of the standard deduction and child care credits) will actually happen.