Sunday, April 23, 2017

When will the deficit become a problem?


The U.S. can probably handle a budget deficit of up to $800 billion per year without a problem.  We already have a national debt of almost $20 trillion, so this only adds 4% per year.  However, I think this is about the limit.  We are projected to bust through this in 2022.  So until then, there is really nothing to worry about.

That is, if we never have a recession again.  If we do have a recession, which I think we almost certainly will next year, then all bets are off.  The only way we know how to handle recessions is to increase spending in the magnitude of trillions.

Also note that the deficit is projected to "bottom out" in 2018 at $494 billion.  After the deficit will start going up again at the rate of $50 to 100 billion per year into infinity.  And that is the rosy scenario, assuming no recession ever and no problems with social security.

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