EconAir

    Fiscal Policy   Some basic definitions:   Deficit.    The difference between the federal government’s spending and its revenue in one fiscal year.   The fiscal year starts on October 1.  So fiscal year 2024 started on October 1, 2023. You know right away this is going to be confusing. Yearly deficits before the coronavirus were around $1 trillion per year. For fiscal year 2021, the deficit was $2.8 trillion. Total stimulus spending and tax cuts were around $4 trillion. The Congressional Budget Office’s latest projection is an average yearly deficit of $1.5 trillion for the next 10 years. This should be viewed as a minimum.   Social Security and Medicare are funded by their own taxes and working down their trust funds (selling government bonds). Subtracting Social Security and Medicare taxes from the Federal budget, other revenue covers about 50-60% of all other government spending; the other 40-50% is the deficit and financed by borrowing.   Debt .  Short for national debt.

  According to the latest Congressional Budget Office (CBO) long-range forecast, government revenue will be $1.3 trillion more in 2030 than in 2020. Government debt will increase $10 trillion, from $30 trillion to $40 trillion in the same time period. If the average interest rate in 2030 is 4%, below the long-term average of 5%, then interest on the national debt in 2030 will be about $1.0 trillion higher than in 2022. Thus, most of the increase in federal tax revenue will go to pay for the increased interest expense on the national debt.   In every year in this interval, the deficit - the increase in the national debt - will be greater than the increase in revenue.   If the national debt rises to $50 trillion over the next eight years, as some analysts expect, then the increase in interest expense, at 4%, will be about $1.4 trillion. Thus, all the increase in revenue will just pay for the increase in interest expense.   CBO forecast is probably optimistic. By law, the forecast cannot