Category Archives: budget

Twin Deficits Redux? CBO Predicts

From the recent CBO Budget and Economic Outlook, the projected current account and implied cyclically adjusted budget balance.


Figure 1: Structural/cyclically adjusted Federal budget balance (dark blue), and current account balance (dark red), both as a share of GDP. NBER defined recession dates shaded gray. CBO projection period shaded gray. Projection of structural budget balance estimated by author using June 2017 estimate, adding in legislative changes reported in CBO (2018). Source: BEA 2017Q4 3rd release, CBO (2018), and author’s calculations.

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Imagine…107% Publicly Held Debt to GDP Ratio

(Some) defenders of the Tax Cuts and Jobs Act as passed argue that tax cuts for households will be extended, rather than disappearing by 2027. What does that mean for debt?


Source: CRFB. Note: Differs from gross debt by netting out intra-Federal government holdings.

CRFB estimates FY2019 deficits will be $1.1 trillion.

Fortunately, the President has stated he will not sign a tax bill that he believes will increase the budget deficit.

Prepare for Massive Deficits As Far As the Eye Can See

Signs are the putative Republican “deficit hawks” are about to sign away whatever integrity they had. What are the implications for the deficit going forward, keeping in mind the fact we are near or at full employment.


Figure 1: Federal budget balance without automatic stabilizers, as a share of potential GDP (blue), and Federal budget balance as share of actual GDP (red), and baseline forecast Federal budget balance from June CBO forecast (pink), and alternative under Senate budget bill (teal), both as share of projected GDP. NBER defined recession dates shaded gray. Source: CBO, Budget and Economic Outlook: An Update (June 2017), and CBO, Cost Estimate (November 2017), NBER, and author’s calculations.
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