According to a recent study, the federal government’s budget is in such bad shape that balancing the books would either require a 30% decrease in expenditure or a 40% increase in taxes.
According to figures from the Office of Management and Budget, the budget deficit, which represents the gap between government receipts and expenditures in a fiscal year, will surpass $1.4 trillion in 2022. The national debt is already approaching $31.5 trillion, even as maintenance expenses rise owing to increased interest rates. According to economists at the University of Pennsylvania, American fiscal policy is in “a state of permanent imbalance as the current debt plus projected future expenditure outstrips future tax revenue,” necessitating either a significant reduction in expenditures or a major increase in revenues.
“The federal government, like all people and enterprises, is subject to a budget constraint: it must cover all expenditures, future and current, from its non-tax and tax earnings over time,” the research stated. “By definition, fiscal imbalance must be at zero for fiscal policy to be sustainable in the absence of future changes.”
Over the next 75 years, analysts predict that the fiscal deficit would equal 7% of the current value of all future gross domestic output. To restore order to the United States’ budget, across-the-board cutbacks to programs like Medicare, Social Security, and Medicaid would be required, as would across-the-board increases to individual taxes, payroll taxes, and company taxes, or some combination of tax increases and expenditure cuts.
The future measurements of government indebtedness were calculated using the Financial Accounting Standards Board’s Generally Accepted Accounting Principles, which require corporations to record the “present value of gaps in their long-term obligations.” When existing debts are added to the present value of predicted future shortfalls over the next 75 years, the result is a $93.8 trillion fiscal imbalance.
Over the last few decades, both Republican and Democratic governments have presided over increases in the national debt. Although Barack Obama ran budget deficits of up to $1.4 trillion during his first term, President Donald Trump posted a deficit close to $1 trillion in 2019, the year just before the deficit more than quadrupled to $3.1 trillion due to stimulus spending. According to an assessment by the Committee for a Responsible Federal Budget, packages approved by President Biden will contribute upwards of $4.8 trillion in new deficit spending between 2021 and 2031.
Biden has claimed that the reported tapering of the deficit under his administration justified further expenditure, omitting to acknowledge that the spending increases over the last three years are due to stimulus programs enacted during the lockdown-induced recession.
“Things have been different under my watch. The deficit has decreased both years I’ve been in office,” Biden said. “And I just signed legislation that is going to lower it substantially more in the decades to come. Republicans in Congress are now doubling down on their pledge to re-explode the deficit. Just last week, Republican leaders stated that if they have their way, they will prolong Trump’s tax cuts, which are set to expire in a few years.”