On January 22, 1990, the last book that was published during Dr. Seuss’s lifetime was released. Oh, The Places You’ll Go! has become an enduring and favorite gift for students graduating anything from kindergarten to college. It is interesting to note that this book’s sales spike from April to June each year during graduation season.
There are many words of wisdom that apply to people in various phases of life, but one of the most well-known is:
On February 15, 2023, the Congressional Budget Office (CBO), which provides non-partisan financial analysis for the US Congress, released its updated budget and economic outlook for the next ten years. Unfortunately, balancing our budget does not seem to be something that anyone on either side of the aisle is taking seriously at the present time.
In the chart below, you can see actual government tax revenue, represented by the black line, along with various government spending categories from the calendar year 2000 forward. The numbers for the next ten years are from their updated projections. They are projecting a budget deficit of just over $1.4 trillion for the current fiscal year. They then expect that from 2024 to 2023 that the federal budget deficit will average $2 trillion per year.
Source: CBO & Mauldin Economics
As you look to the far-right side of the graph, which represents 10 years into the future, you will see that the black line representing tax revenue, does not cover mandatory spending on Social Security, Medicare, Medicaid, federal pensions, and defense spending. This means that the interest on the debt and all discretionary spending by Congress would have to be funded through additional government borrowing.
A second chart put together by the news organization Axios shows how much we would have to cut spending in various categories to balance the federal budget over the next 10 years. As we are well aware, most federal spending is in programs and categories that one party or the other does not want to touch. However, if no cuts are made to these existing programs, it means bigger cuts must be made elsewhere.
As you can see in the chart above, you would have to cut all programs by 26% in order to balance the budget in 10 years. If you wanted to exclude cuts to defense spending, the VA, and Social Security, you would have to cut all other programs by 51%. That does not include protecting Medicare.
As I tell clients on a regular basis, math is a real thing. If you don’t cut spending, you would have to raise taxes. However, tax increases generally slow the economy, which could reduce tax revenue collected. This would potentially exacerbate the existing problems further.
None of these solutions seem pleasant or palatable. Therefore, we are left to wait and wonder what Congress may look to do as these cumulative budget deficits continue to add to our already outstanding debt. Dr. Seuss left us with a much more positive and optimistic outlook for solving the issues the hero of his book was facing.
We will have to see if anybody on Capitol Hill has the courage or political will to address these issues in order to bring our country a similar level of balance and success. In the meantime, we should strive to understand these issues as they will be talked about incessantly in next year‘s congressional and presidential elections. We want you, our trusted friends and clients, to be able to see through the inevitable opinion and spin that politicians will put on this data. We feel it is important for you to be informed as we continue “Moving Life Forward”.
© 2023 Jesse Hurst
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