Deficit vs. Debt

[Minerva]

I will start this out with a phrase that might never have been written before in these hallowed halls of political debate but here goes:

I may be wrong.....but...
I always understood deficit to be a yearly summation of income vs. outgo when income is insufficient. Debt would be the yearly accumulation of these deficits as they are finance with the selling of Treasury notes.
But this paragraph from a news report kind of flummoxed me.

House Republicans’ sweeping tax and spending cuts package would add $2.4 trillion to the deficit over the next decade, according to the Congressional Budget Office’s analysis of the bill that GOP lawmakers narrowly approved last month.

I thought the appropriations bill was a yearly event, or at most a four year.

Now I could have gone out into that gray void of the web and found proper explanations and definitions, but I thought I would give ya'll a shot a enlightening me.

 

[dmpi]

Future spending is just an estimate giving what we know today. A lot of thing we don't know. One big unknown is we don't know about future interest rates and servicing a billion dollar debt is a BIG deal. Also I should add that if we ONLY add 2.4 trillion to the deficit over 10 years that's actually a good thing, not a bad thing.

 

[Mycroft]

I will start this out with a phrase that might never have been written before in these hallowed halls of political debate but here goes:

I may be wrong.....but...
I always understood deficit to be a yearly summation of income vs. outgo when income is insufficient. Debt would be the yearly accumulation of these deficits as they are finance with the selling of Treasury notes.
But this paragraph from a news report kind of flummoxed me.

I thought the appropriations bill was a yearly event, or at most a four year.

Now I could have gone out into that gray void of the web and found proper explanations and definitions, but I thought I would give ya'll a shot a enlightening me.

First of all, the BBB isn't an appropriations bill. Appropriations are still scheduled to be addressed later this year.

Second, the CBO is essentially correct with their $2.4 trillion addition to the deficit "over 10 years", but that's assuming nothing changes in the next 10 years.

Third, the CBO can't predict changes or other things, like increased revenue resulting from new legislation, new trade deals, increased domestic productivity, etc. These changes can render that CBO prediction totally moot.

Bottom line: Take any CBO prediction with a grain of salt.

 

[Gimmesometruth]

First of all, the BBB isn't an appropriations bill. Appropriations are still scheduled to be addressed later this year.

Second, the CBO is essentially correct with their $2.4 trillion addition to the deficit "over 10 years", but that's assuming nothing changes in the next 10 years.

Third, the CBO can't predict changes or other things, like increased revenue resulting from new legislation, new trade deals, increased domestic productivity, etc. These changes can render that CBO prediction totally moot.

Bottom line: Take any CBO prediction with a grain of salt.

None of this has any bearing upon what the BBB is or that the CBO is incorrect in its analysis.

This is you handwaving, gaslighting.

 

[cpwill]

First of all, the BBB isn't an appropriations bill. Appropriations are still scheduled to be addressed later this year.

Second, the CBO is essentially correct with their $2.4 trillion addition to the deficit "over 10 years", but that's assuming nothing changes in the next 10 years.

Well, sorta. It assumes that the broad changes they anticipate occur in the next 10 years.

Third, the CBO can't predict changes or other things, like increased revenue resulting from new legislation, new trade deals, increased domestic productivity, etc. These changes can render that CBO prediction totally moot.

Or rising interest rates because the bond market begins to demand a higher risk premium due to us having overloaded on debt

Bottom line: Take any CBO prediction with a grain of salt.

 

[Mycroft]

None of this has any bearing upon what the BBB is or that the CBO is incorrect in its analysis.

Correct, but my post is about the veracity of the CBO projections...which is what the OP was asking about.

 

[Gimmesometruth]

Correct, but my post is about the veracity of the CBO projections...which is what the OP was asking about.

The OP is confused about the length of time the provisions can have effect. Your casting doubt about the CBO's analysis of the size of the effects is dismissed, it is irrelevant.

 

[JohnfrmClevelan]

Future spending is just an estimate giving what we know today. A lot of thing we don't know. One big unknown is we don't know about future interest rates and servicing a billion dollar debt is a BIG deal. Also I should add that if we ONLY add 2.4 trillion to the deficit over 10 years that's actually a good thing, not a bad thing.

That estimated $2.4 trillion is in addition to our normal deficits over that ten years.

 

[Minerva]

That estimated $2.4 trillion is in addition to our normal deficits over that ten years.

That's enlightening.

 

[OrphanSlug]

I will start this out with a phrase that might never have been written before in these hallowed halls of political debate but here goes:

I may be wrong.....but...
I always understood deficit to be a yearly summation of income vs. outgo when income is insufficient. Debt would be the yearly accumulation of these deficits as they are finance with the selling of Treasury notes.
But this paragraph from a news report kind of flummoxed me.

I thought the appropriations bill was a yearly event, or at most a four year.

Now I could have gone out into that gray void of the web and found proper explanations and definitions, but I thought I would give ya'll a shot a enlightening me.

You are likely blending a few subjects that need to be put together slightly differently.

Under normal conditions, which is becoming more abnormal the further we go (and that is a discussion for another time,) when the CBO is saying that a bill adds to deficits over the next decade it is based on several standing projections.

You are correct in that a deficit exists for a fiscal year in which federal outlays are greater than federal receipts for that fiscal year. It is also correct to say that in the modern era the US government tends to run a deficit every fiscal year. Since 1971 (arguably the last straw in the removal of the US dollar from the Gold Standard,) there has only been 4 years where recorded receipts were greater than outlays. Or, only 4 instances of a federal budget surplus in the past 54 'ish years.

You are also correct in that if Congress played by the rules appropriations is for *each fiscal year,* they just rarely do that. The last time Congress passed a full process complete appropriations based budget by the rules was 1996. A few times close over the years, but not really by the rules. Reliance on resolutions is now the norm, no matter who is in charge President to Congress (party speaking.)

So, when the CBO goes through projections for the next 5, 10, or more years it is based on what they know of projected outlays to receipts against a projection of the economy (GDP.) Now, usually that projection is conservative and most understand why, but when a bill that gets this much attention it is looked at by the CBO. They are looking at what the bill does against prior outlays to receipts projections. In this case, with Trump's "Big Beautiful Bill," the CBO knows receipts are going to take the biggest hit over the next 10 years. Spending reductions are not near enough and absent artificial inflation of GDP projections (without basis to do so) then the CBO can conclude deficits get worse over the next 10 years.

You are also correct in that to deal with this the auction of US Treasuries is bound to increase in amounts. Emphasis on greater issuance of debt is the likely remedy here. Now, the The US Treasury auction schedule has been long standing and is largely predictable week to week, month to month. All this does is add to the number of US Treasuries auctioned by type.

Meaning, increased Debt held by the Public and consequently increased Total Debt.

Concluding, beyond any reasonable argument to the contrary, that MAGA Republicans are flat out lying when they talk about "fiscal responsibility" and "decreasing additions to deficits and debt." This bill adds to both, very quickly, assuming the Senate passes it.

 

[OrphanSlug]

Correct, but my post is about the veracity of the CBO projections...which is what the OP was asking about.

Only because you, like Trump, want the CBO to change GDP projections in an effort to cover up MAGA's real intention. Tax breaks benefiting the wealthy the most, at the direct expense of fiscal responsibility by adding to deficits and debt.

 

[noonereal]

if we ONLY add 2.4 trillion to the deficit over 10 years that's actually a good thing, not a bad thing.

I am left speechless at this inane post.

 

[Mycroft]

Only because you, like Trump, want the CBO to change GDP projections in an effort to cover up MAGA's real intention.

I don't want that at all. Personally, I think the CBO should be taken for what it is...a limited estimate. I mean, it serves a purpose for politicians in Congress, but when it comes to the big picture it is lacking. People need to understand that.

Tax breaks benefiting the wealthy the most, at the direct expense of fiscal responsibility by adding to deficits and debt.

That's a very narrow and simplistic summation of the BBB.

 

[OrphanSlug]

I don't want that at all. Personally, I think the CBO should be taken for what it is...a limited estimate. I mean, it serves a purpose for politicians in Congress, but when it comes to the big picture it is lacking. People need to understand that.

That does not match the rhetoric, at all.

That's a very narrow and simplistic summation of the BBB.

But accurate, that is what this bill does and the complaints about the CBO are a diversion tactic.

 

[Mycroft]

That does not match the rhetoric, at all.

"the rhetoric"?

Why should I care about "the rhetoric"?

But accurate, that is what this bill does

The CBO's summation is accurate, too...but, like yours, it's also simplistic. The only difference is that the CBO isn't as simplistic as your summation.

and the complaints about the CBO are a diversion tactic.

The CBO's prediction is part of the overall question posed by the OP. Talking about how the CBO arrives at their prediction has a direct bearing on the answer.

 

[OrphanSlug]

The CBO's summation is accurate, too...but, like yours, it's also simplistic. The only difference is that the CBO isn't as simplistic as your summation.

The CBO's prediction is part of the overall question posed by the OP. Talking about how the CBO arrives at their prediction has a direct bearing on the answer.

Which is why the CBO has become a political target, often more when "conservatives" suggest fiscal responsibility and debt is a reason to do pass something that ultimately makes debt worse.

It is an easy call out, Trump's "Big Beautiful Bill" intentionally adds to deficits and debt.

 

[Mycroft]

It is an easy call out, Trump's "Big Beautiful Bill" intentionally adds to deficits and debt.

Easy...only is you take the simplistic approach and ignore Trump's entire agenda.

 

[Mycroft]

Which is why the CBO has become a political target, often more when "conservatives" suggest fiscal responsibility and debt is a reason to do pass something that ultimately makes debt worse.

It is an easy call out, Trump's "Big Beautiful Bill" intentionally adds to deficits and debt.

I've talked about your...and the CBO's...simplistic approach to the BBB. I understand the situation very well, but I'm not good at putting it into words. Because of that, I'd like to bring your attention to an interview with three men from the Trump administration who ARE very good at putting it into words. This is a lengthy interview, but it's one that, I believe, is well worth the time invested in watching and listening.

 

[ttwtt78640]

Future spending is just an estimate giving what we know today. A lot of thing we don't know. One big unknown is we don't know about future interest rates and servicing a billion dollar debt is a BIG deal. Also I should add that if we ONLY add 2.4 trillion to the deficit over 10 years that's actually a good thing, not a bad thing.

The key is that’s only based on what’s in the House version of the OBBB - which isn’t a complete annual CR or appropriations package. It (mainly) has some further FIT cuts and Medicaid ‘savings’ coupled with some defense, homeland security and FFA spending increases.

 

[OrphanSlug]

I've talked about your...and the CBO's...simplistic approach to the BBB. I understand the situation very well, but I'm not good at putting it into words. Because of that, I'd like to bring your attention to an interview with three men from the Trump administration who ARE very good at putting it into words. This is a lengthy interview, but it's one that, I believe, is well worth the time invested in watching and listening.

I gave you a huge benefit of the doubt by watching all of that.

I get the political argument about what the bill is intended to do, including promises to voters as motivations. I even get the political argument about the economic implications of the bill, comments on the CBO or perceptions of the Fed. Some mentioned far more than others.

The issue is I do not agree with their economic conclusions, and all of that explanation noted we still have a "Big Beautiful Bill" that adds to deficits and debt.

There simply is not an economic model, some projection, where an economic boom suddenly closes the gap between projected outlays and receipts to cover the new gap created (let alone the gap already there from the present course we are on.) Even letting the tax cuts expire, for lack of a better way to put it, still does not close the gap.

I am stuck at the original conclusion that the "Big Beautiful Bill" actually makes fiscal matters worse, on an already shaky economy from other factors. Like our multiple-way tariff based trade temper tantrum.

 

[OrphanSlug]

The key is that’s only based on what’s in the House version of the OBBB - which isn’t a complete annual CR or appropriations package. It (mainly) has some further FIT cuts and Medicaid ‘savings’ coupled with some defense, homeland security and FFA spending increases.

To your unspoken point, we already know the Big Beautiful Bill has no real prayer in the Senate as it stands.

Ron Johnson is out, looks to be stalled on what would be changed to even get the House to look at it again. I am kinda surprised this is where MAGA Republicans are, that no one considered how the Senate may vote given that some of them in the Senate are referencing the exact same subject we are. CBO projected new deficits and debt, with no economic model offered by MAGA Republicans to absorb or at least counter CBO projections.

 

[ttwtt78640]

To your unspoken point, we already know the Big Beautiful Bill has no real prayer in the Senate as it stands.

IMHO, the Senate will make a few minor modifications (but, of course, call them significant) and claim the OBBB will save some massive amount of taxpayer money due to projected (yet, unspecified) future GDP growth.

Ron Johnson is out, looks to be stalled on what would be changed to even get the House to look at it again. I am kinda surprised this is where MAGA Republicans are, that no one considered how the Senate may vote given that some of them in the Senate are referencing the exact same subject we are. CBO projected new deficits and debt, with no economic model offered by MAGA Republicans to absorb or at least counter CBO projections.

 

[OrphanSlug]

IMHO, the Senate will make a few minor modifications (but, of course, call them significant) and claim the OBBB will save some massive amount of taxpayer money due to projected (yet, unspecified) future GDP growth.

Perhaps, given what Republican lawmakers have faced from the public recently it is going to make walking that tightrope worse... the Sunday morning talk shows, left to right, should be a riot this weekend.