According to the Congressional Budget Officeâs (CBO) latest âUpdate on the Budget Outlook,â this yearâs $3.3 trillion federal deficit is not just three times larger than last year: it is the largest federal deficit in history. The CBO update also predicts that the federal debt will equal 104 percent of the gross domestic product (GDP) next year and will reach 108 percent of GDP by 2030.
The CBO update also shows that the Social Security, Medicare, and highway trust funds will all be bankrupt by 2031. This will put pressure on Congress to bail out the trust funds thus further increasing the debt.
This yearâs spike in federal spending was caused by the multi-trillion dollar coronavirus relief/economic stimulus bills passed by Congress and signed by the president. However, spending had already increased by $937 billion from the time President Trump was sworn in until the lockdown.
Federal spending is unlikely to be reduced no matter who wins the presidential election. Former Vice President Joe Biden has proposed increasing spending on everything from Obamacare to militarism to âgreenâ cronyism. Yet some progressives are attacking Biden for being to âstingyâ in his spending proposals. Even more distressing is how few progressives are critical of Bidenâs support for increasing the military budget.
With some notable exceptions, such as his infrastructure plan, President Trump is not proposing any massive new spending programs. However, he Is not promising to stop increasing, much less cut, federal spending.
Most Republicans have abandoned their Obama-era opposition to deficit spending to support President Trumpâs spending increases. This repeats a pattern where Republicans oppose deficit spending under a Democrat president but decide that âdeficits donât matterâ when a Republican is sitting in the Oval Office. If Biden wins in November, Republicans will likely once again discover that deficits do matter, especially if Democrats also gain control of the Senate.
Government spending forcibly takes resources from the private sector, where they are used to produce goods and services desired by consumers, and puts them in the hands of politicians and bureaucrats. This distorts the market, reducing efficiency and lowering the peopleâs standard of living. This, combined with pressure to monetize the federal debt, causes the Federal Reserve to pump money into the economy leading to a boom-bust business cycle.