Yes. That’s the San Francisco Chronicle digital headline, and it’s true all over the United States of America, with some exceptions like Mount Rushmore last night and DC tonight. Back in 2010, I started writing on each July 4th about the the exploding fireworks and comparing them to the exploding long term projections of the federal debt by the Congressional Budget Office (CBO). The exploding debt charts looked so much like the exploding Fourth of July fireworks, as you can see blogs from year’s past 2010, 2011, 2012, 2013, 2016, 2017, 2018, 2019
One can only hope that such writings and opeds and testimonies had some influence, and it is good that the budget situation improved compared to some of the earlier projections. But this year, not only are fireworks missing, so are CBO’s budget projections. So there is not much to say now.
The budget projections are coming later in the summer, or so it is said in CBO’s abbreviated outlook for economic growth, inflation and interest rates. As the Congress and the Administration deliberate about the next budget bill, it would be helpful to have such a budget baseline from which to evaluate the alternatives. Researchers in the private sector, including John Cogan, Daniel Heil, and me, must create a budget baseline in order to consider alternative fiscal packages.
In the meantime, I recommend considering what the Committee for a Responsible Federal Budget is saying, Here is a chart from their recent article on the budget. It shows long term debt projections.
Note that the debt had a certain July 4th feel to it before the pandemic struck the economic deeply. The March 2020 outlook had the debt exploding to nearly 180% of GDP. But the CRFB now has the debt growing to 220% or even 268% as a result of the actions taken in response to the financial crisis. Few are talking about these large numbers now, but many models show that reducing the upward trajectory would be good for economic growth, incomes and employment. So let’s hope that point of view gets into the debate even if we do not have as many Independence Day fireworks this year.