Biden’s Fiscal Crisis Is Far Worse Than We Thought
Nothing should shock us anymore, but the latest Congressional Budget Office report did. Released this week, the report shows that the nation is in vastly worse financial shape than anyone thought just a few months ago. And the report makes clear who is to blame.
The CBO’s latest “Budget and Economic Outlook” projects that the federal deficit this year will top $1.9 trillion. That’s $408 billion higher – a 27% increase – than what the CBO thought it would be just four months ago.
This will make the 2024 deficit the biggest ever recorded in American history – not counting the two years of panic-induced COVID-19 spending sprees – and will mark the third consecutive increase in deficits under Biden. (See the chart below.)
It’s also highly unusual for the CBO to make such a huge correction to its forecast.
The nonpartisan office routinely produces a budget and economic forecast at the start of the year, and then an update mid-year. Normally, these don’t vary much. In Trump’s first three years, for example, the average variance between the first forecast and the final deficit was just $73 billion.
Under Biden, however, deficits have come in higher than expected every single year by an average of $380 billion.
Here’s where the sudden, sharp jump in the 2024 deficit came from, according to the CBO:
Student loan bailouts: $145 billion. Not only did Biden add another $66 billion to his student bailout scheme this year, the previous giveaways are costing far more than expected – $74 billion this year alone.
Health care subsidies: $69 billion. Biden’s expansion of Obamacare is costing $22 billion more this year than expected, and changes in Medicaid payment rules added another $47 billion.
Bank bailouts: $72 billion. The cost of bailing out banks – banks that failed largely because of Biden’s inflationary economic policies – is turning out to be $72 billion higher than the CBO had previously expected.
Net interest: $22 billion. The CBO also had to boost the cost of servicing the national debt by $22 billion just this year thanks to inflation, higher interest rates, and bigger-than-expected deficits.
Discretionary spending: $60 billion. This is mainly the result of the “emergency” supplemental Biden insisted upon to finance the war in Ukraine, with some for Israel, as well as appropriations bills that came in higher than expected. (Republicans share the blame for these increases in spending.)
A small fraction of these unexpected spending increases was offset by larger-than-expected tax revenues and slight changes to the CBO’s economic forecast.
But remember, this is just for 2024. Over the next decade, the CBO projects the government will run $22 trillion in deficits, which is $2 trillion more than it had forecast in February.
The current forecast is also way above what the deficit would have been had Donald Trump’s policies remained in effect. In February 2021, before Biden got any of his policies enacted, the CBO projected deficits from 2024-2031 would total $10.2 trillion.
The CBO now expects those deficits over those years to be $5.6 trillion bigger – a more than 50% increase. (See chart below.)
In other words, Biden’s policies will add $3.7 trillion to the deficit in just seven years.
Keep all this in mind the next time the president brags about how he’s cut the deficit “more than any president in history.”
— Written by the I&I Editorial Board
Correction: The word “bigger” was missing from this paragraph causing confusion. It has been corrected. “In February 2021, before Biden got any of his policies enacted, the CBO projected deficits from 2024-2031 would total $10.2 trillion. The CBO now expects those deficits over those years to be $5.6 trillion bigger – a more than 50% increase. (See chart below.)“
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