CBO predicts budget deficit

(Congressional Budget Office Release)

Deficits

CBO projects a federal budget deficit of $2.3 trillion in 2021, nearly $900 billion less than the shortfall recorded in 2020. At 10.3 percent of gross domestic product (GDP), the deficit in 2021 would be the second largest since 1945, exceeded only by the 14.9 percent shortfall recorded last year. Those deficits, which were already projected to be large by historical standards before the onset of the 2020–2021 coronavirus pandemic, have widened significantly as a result of the economic disruption caused by the pandemic and the enactment of legislation in response.

In CBO’s projections, annual deficits average $1.2 trillion a year from 2022 to 2031 and exceed their 50-year average of 3.3 percent of GDP in each of those years. They decline to 4.0 percent of GDP or less from 2023 to 2027 before increasing again, reaching 5.7 percent of GDP in 2031. By the end of the period, both primary deficits (which exclude net outlays for interest) and interest outlays are rising.

Debt

Federal debt held by the public—which stood at 100 percent of GDP at the end of fiscal year 2020—is projected to reach 102 percent of GDP at the end of 2021, dip slightly for a few years, and then rise further. By 2031, debt would equal 107 percent of GDP, the highest in the nation’s history.

Revenues

Federal revenues are projected to generally increase relative to GDP as a result of the expiration of temporary pandemic-related provisions, scheduled increases in taxes, and other factors.

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Outlays

Projected outlays decline relative to GDP for the next few years, as pandemic-related spending wanes and low interest rates persist. Outlays then increase relative to GDP, owing to rising interest costs and greater spending for major entitlement programs.

Changes Since CBO’s Previous Projections

Relative to its estimates from September 2020, CBO’s estimate of the deficit for 2021 is now $448 billion (or 25 percent) larger, and its projection of the cumulative deficit between 2021 and 2030 (at $12.6 trillion) is now $345 billion (or 3 percent) smaller. In 2021, the costs of recently enacted legislation are partly offset by the effects of a stronger economy. In subsequent years, the largest changes stem from revisions to the economic forecast. CBO now projects stronger economic activity, higher inflation, and higher interest rates, boosting both revenues and outlays—the former more than the latter.

The Economy

As expanded vaccination reduces the spread of COVID-19 (the disease caused by the coronavirus) and the extent of social distancing declines, real (inflation-adjusted) GDP is projected to grow by 3.7 percent in 2021, returning to its prepandemic level by the middle of the year. With growth averaging 2.6 percent over the 2021–2025 period, real GDP surpasses its potential (maximum sustainable) level in early 2025. The unemployment rate gradually declines through 2026, and the number of employed people returns to its prepandemic level in 2024.

Real GDP growth averages 1.6 percent over the 2026–2031 period. That average growth rate of output is less than its long-term historical average, primarily because the labor force is expected to grow more slowly than it has in the past. Over the forecast period, the interest rate on 10-year Treasury notes is projected to rise gradually, reaching 3.4 percent in 2031.

illustration: Pixabay

Quick Analysis

What does the Reversal of Harvey Weinstein’s Conviction Portend for Donald Trump?

In 2020, the New York County District Attorney’s Office scored a major conviction against a powerful Hollywood Producer – Harvey Weinstein. As described by Forbes, “Weinstein has faced scores of sexual harassment and assault accusations since 2017…[d]uring his New York trial, Weinstein was cleared of predatory sexual assault and rape in the first degree.” He was, however, convicted of Sexual Assault in the First Degree, and Rape in the Third Degree, and was sentenced to 23 years in prison. Recently, the New York State Court of Appeals has reversed Weinstein’s conviction, and sent the case back to the lower court for a retrial. While “Weinstein lawyer Arthur Aidala called the Court of Appeals ruling ‘a tremendous victory for every criminal defendant in the state of New York,’” the usual groups made the usual complaints. “Attorney Douglas H. Wigdor, who has represented eight Harvey Weinstein accusers including two witnesses at the New York criminal trial, called it ‘a major step back’…Debra Katz, a prominent civil rights and #MeToo attorney who represented several Weinstein accusers, said her clients are ‘feeling gutted’ by the ruling… “Allegations against Weinstein, the once powerful and feared studio boss behind such Oscar winners as ‘Pulp Fiction’ and ‘Shakespeare in Love,’ ushered in the #MeToo movement. Dozens of women came forward to accuse Weinstein, including stars such as Ashley Judd and Uma Thurman. His New York trial drew intense publicity, with protesters chanting ‘rapist’ outside the courthouse. ‘This is what it’s like to be a woman in America, living with male entitlement to our bodies,’ Judd said…” The New York Court of Appeals is known for being a left-of-center, activist court. Why would it reverse a conviction for rape entered against a character as reportedly heinous as Harvey Weinstein? Because despite its overall Progressive stance, even a notoriously leftist court knows an injustice when they see one. The decision to reverse Weinstein’s conviction is an important one. It underlines the necessity for fairness to all defendants, even unpopular ones accused of egregious crimes. The decision also has application to the ongoing case proceeding in New York County Supreme Court against former President Donald Trump. In May of 2023, we discussed the issue of whether or not Donald Trump’s indictment in New York County for actions that occurred in 2017 was beyond New York’s Statute of Limitations for prosecution of the criminal offenses with which he is charged. At that time, we noted the language of CPL Section 30.10(4)(A)(i), which excluded the time during which a defendant “was continuously outside this state.” This issue is also discussed in Chapter 6 of our book, The Making of a Marty – An Analysis of the Indictments of Donald Trump. We also stated that “it is entirely possible that the time Donald Trump spent in the White House, serving his country as the President of the United States, could be used against him in New York State Supreme Court.” Like Trump, Weinstein also spent many years outside the State of New York. “Prosecutors charged Weinstein with multiple crimes, including rape in the third degree for an alleged assault that occurred in March 2013. Weinstein was charged in May 2018, two months after the five-year statute of limitations on that offense would have expired. Weinstein challenged the charge, arguing it fell outside the statute of limitations and as a resident of New York state the extension wouldn’t apply to him. Prosecutors used records from ‘United States Customs and Border Control’ to show that Weinstein had been out of New York for 193 days during that five-year period– more than the 68 days needed to capture the earlier conduct. The judge rejected Weinstein’s argument and allowed the charge to stand.” Judge Wilson’s article concludes tomorrow Photo: Pixabay