The House is expected to take up the Senate-passed budget resolution next week and thereby set the stage for consideration of an epic, $3.5 trillion tax-spend-and-borrow reconciliation bill later this year. Democratic leaders are already planning for this effort to add another $1.75 trillion to federal debt over a decade based on conventional scoring rules (which exclude growth effects); the reality is likely to be worse. The reason is the iron law of entitlements: they always become more expensive than initially advertised. A corollary is that their offsets rarely measure up, or else Congress scales them back if they might actually pinch.
Consideration of this plan is taking place against a backdrop of rapid budgetary deterioration. Part of the story is that back-to-back global calamaties — the financial crisis that began in 2007 and the on-going COVID-19 pandemic — forced the federal government to borrow heavily to mimimize the resulting economic damage. At the end of this fiscal year (on September 30th), federal debt is likely to stand at $23.0 trillion, or 102.7 percent of GDP, up from 40 percent of GDP at the end of 2008. The 2021 deficit alone is expected to be 13.4 percent of GDP.
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