Budget deficits normally rise during recessions and fall when the economy is growing, but that’s not the case today. Deficits are rising sharply despite robust economic growth, increasing from $666 billion in 2017 to an estimated $970 billion in 2019, with $1 trillion annual deficits expected for years after that.
As the deficit hawks at the Committee for a Responsible Federal Budget point out in a blog post Thursday, “the deficit has never been this high when the economy was this strong … And never in modern U.S. history have deficits been so high outside of a war or recession (or their aftermath).” The chart above shows just how unusual the current deficit path is when measured as a percentage of GDP.
The federal government’s total non-defense discretionary spending – which covers everything from education and national parks to veterans’ medical care and low-income housing assistance – equals 3.2% of GDP in 2020, near historic lows going back to 1962, according to an analysis this week from the Center on Budget and Policy Priorities.
The Committee for a Responsible Federal Budget estimated this week that President Trump has now signed legislation that will add a total of $4.7 trillion to the national debt between 2017 and 2029. Tax cuts and spending increases account for similar portions of the projected increase, though if the individual tax cuts in the 2017 Republican overhaul are extended beyond their current expiration date at the end of 2025, they would add another $1 trillion in debt through 2029.
Are interest rates destined to move higher, increasing the cost of private and public debt? While many experts believe that higher rates are all but inevitable, historian Paul Schmelzing argues that today’s low-interest environment is consistent with a long-term trend stretching back 600 years.
The chart “shows a clear historical downtrend, with rates falling about 1% every 60 years to near zero today,” says Bloomberg’s Aaron Brown. “Rates do tend to revert to a mean, but that mean seems to be declining.”
Lawmakers are considering three separate bills that are intended to reduce the cost of prescription drugs. Here’s an overview of the proposals, from a series of charts produced by the Kaiser Family Foundation this week. An interesting detail highlighted in another chart: 88% of voters – including 92% of Democrats and 85% of Republicans – want to give the government the power to negotiate prices with drug companies.