Economy to Grow 3% on Borrowing of $1.6 Trillion a Year Says CBO – Trustnodes

The United States economy is to grow by 3.1% quarter over quarter and 3.8% over last year in real terms.

That’s the projection of the Congressional Budget Office (CBO) for 2022, but the picture looks somewhat bleak on the debt front. They say:

“CBO projects that the federal budget deficit will shrink to $1.0 trillion in 2022 (it was $2.8 trillion last year) and that the annual shortfall would average $1.6 trillion from 2023 to 2032.”

$1.6 trillion is almost a doubling from 2019 projections of $900 billion, with $1 trillion to be paid on interest alone by 2030.

There has thus been a structural change in the economy with some of the pandemic related spending continuing.

But the returns on such spending seem lackluster. For this year, 3.8% growth over last year is fine. Next year however this falls to 2.8%, and back to semi-stagnation levels of 1.6% in 2024.

Why? One reason is that CBO expects the labor force “to grow more slowly after 2022 as the negative effects of an aging population outweigh the positive effects of an ongoing economic expansion.”

Another reason may well be that CBO sometime gets it wrong, if not almost always, with these being more frameworks rather than what will actually happen.

Because they naturally can’t take into account all factors, and they could not even see the half a trillion tax boost that was received last year.

Still this prediction contrasts and somewhat sharply with some commentary of a recession as CBO instead sees good growth for this year and even somewhat decent growth for next year.

That growth may increase further the tax intake, and so the deficit might turn out not to be about half of the circa $4 trillion that is received in taxes.

If it does, that’s a problem and to solve it either radical measures need to be taken to spur good growth, 3-4% a year, through a shaking up of the civil service and waking it up a bit.

Or spending will have to be cut radically because you can’t borrow half of your income every year and spend 33% of it on just interest payments.

On the other hand inflation will change those percentages, yet US is at a stage where it desperately needs growth and at least for this year and next, there will be some according to CBO.