Downsizing Blog

Another CBO Report Warns of Debt Surging, As a Fiscal Crisis Brews

As debt grows and interest costs rise, irresponsible spending by Congress and the White House is taking a larger toll on American workers, reducing economic opportunity and their take-home incomes significantly. It also puts our nation at greater risk of a sudden fiscal crisis.

A Reality Check on US Industrial Policy and the Manufacturing “Boom”

On June 12, I testified before the Joint Economic Committee (along with Cato’s own Adam Michel) on the current state of US industrial policy and the manufacturing “boom” its supporters assert has already begun. Below is my oral statement to the committee, which summarizes my longer written testimony.

 

Social Security Spending Adds to the National Debt

Does Social Security spending add to the national debt? The answer is yes because the US government did not save any of the excess payroll taxes the Treasury Department collected when Social Security was running a surplus.

Fiscal Effects of School Choice

School choice reforms are spreading across the nation. Governments in 33 states are now providing financial support for private schooling through 80 different programs, as shown in this figure from EdChoice. About one million students are benefiting from these reforms.

Emergency Spending and the Erosion of Congressional Fiscal Norms

Irresponsible emergency spending practices have eroded fiscal norms, contributing directly to America’s mounting debt challenge. Over the last three decades, Congress designated 1 in 10 dollars of federal spending for emergencies. Most of this emergency funding was provided through deficit spending with no plan to pay down the accumulated debt with future surpluses.

Will Economic Growth Be Short‐​Lived as Fiscal Challenges Abound?

The United States has been experiencing remarkable economic growth, even as debt and deficits soar to unprecedented heights. The economy has benefitted from lower interest rate sensitivity in the market and fiscal and monetary tailwinds. These dual trends are largely temporary, hiding the debt drag beneath the surface.

Business Subsidies and State Tax Climates

In researching Cato’s governor report cards, I’ve found that high‐tax states appear to hand out the most special‐interest breaks and subsidies. Let’s look at some supporting data.

Including Emergency Spending in Fiscal Projections Distorts the CBO Baseline

Congress recently approved a $95 billion foreign aid package to send aid to Ukraine, Israel, and the Indo‐Pacific region. Including this new “one‐time” emergency spending in fiscal projections distorts the Congressional Budget Office (CBO) baseline.

The High Cost of War: Ukraine Aid Could Top $240 Billion

To date, the US has committed about $114 billion in Ukraine‐related emergency funding, equivalent to the combined 2023 budget for the Department of Homeland Security and NASA. Should Congress decide to pass additional emergency funding, Ukraine aid plus interest could top $240 billion.

The Threat of Fiscal Dominance: Will the US Resort to Money‐​Printing to Finance the Rising Debt Challenge?

With Congress currently unwilling to seriously address the entitlement spending problem that’s driving the US toward a fiscal cliff, it’s worth evaluating the possibility of more frequent episodes of fiscal dominance and their consequences.

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