Economists sounded surprised recently when inflation remained above expectations for the third straight month, likely keeping interest rates elevated for the foreseeable future. If they looked in Washington’s direction, they shouldn’t be.
Two reports from the Congressional Budget Office (CBO) explain the dilemma our economy faces. In the short term, significant and persistent deficits caused by Washington’s spending keep fueling the inflationary fire. In the longer term, the debt accumulated by all those deficits will make our economy stagnant for future generations.
Trillion-Dollar Deficit
The first CBO report examined the federal government’s financial accounts halfway into the fiscal year. Six months into the budget cycle that ends this Sept. 30, Washington has already racked up a deficit of over $1 trillion.
Granted, the federal government will likely run a surplus in April, given that many individuals either pay their remaining 2023 income taxes, and/or make quarterly estimated payments for their 2024 income taxes, on April 15. But CBO also notes that, after adjusting for various timing shifts, the deficit for the first half of the fiscal year exceeds last year’s fiscal shortfall.
And even though Democrats would have you believe that tax cuts cause all fiscal ills, the growth in the deficit happened even as revenues grew by 7 percent. One chart from the CBO report shows both the growth of revenues compared to last year and the imbalance between revenues and outlays during the first six months of the fiscal year:
The biggest reason spending grew faster than
