In its latest budget outlook the Congressional Budget Office declares America's return to trillion-dollar deficits. At $1.02 trillion for 2020 and exactly $1 trillion for 2021, the deficit then soars past $1.7 trillion by 2030.
what was little more than a footnote amid the noise of impeachment and the continuing chaos of the Democratic primaries, late last month the Congressional Budget Office officially announced that for the first time since 2012, our annual budget deficit will top $1 trillion. Even worse, our fiscal house is set to remain in abominable shape for the foreseeable future: The CBO projects that the deficit will average $1.3 trillion from 2021 to 2030 and that the current $22 trillion gross national debt will reach $36.2 trillion by 2030.
The most shameless of them is the self-proclaimed democratic socialist Bernie Sanders, who has proposed $97.5 trillion in new spending over the next ten years. To finance his grandiose plans, Sanders is proposing a variety of taxes on the rich totaling some $23 trillion and more than $74 trillion in additional debt. Think about that: Sanders’ plan would push the national debt over $100 trillion by the end of the decade.
He has signed $4.7 trillion of new debt into law over his first three years in office. If he wins reelection and continues at that pace, by the end of his second term, Trump will end up having added more to the national debt than President Obama. And he will have done it amid relative prosperity, rather than the recession Obama had to navigate.
Well, Obama's recession was not exactly unfortunate. It was largely self-inflicted. He went on a regulatory spree across the country, to all corners of the economy, making it increasingly difficult for businesses to plan for the future, or even keep their doors open. Many industry groups had to massively expand crony-capitalist practices like lobbying to carve out exceptions and other perks from an otherwise business-hostile administration.
Daval Joshi, chief European investment strategist at BCA Research, thinks the Japanese experience won't be repeated because there is a hard floor for yields around minus 1%. Beyond that, it makes sense to store bank notes in a vault instead, so central banks can't cut the policy rate much below that without the politically explosive move of abolishing physical cash.
For America and the Liquidity Trap Part 1, click here.