CB…Oh No!

With the Federal Reserve’s latest meeting behind us, growing focus is directed to America’s budget.  Expect more of this type of discussion in the news as May wears on because our nation is near its debt limit.  Leadership is expected to meet next week to discuss the matter which could come to a head in early June.  Unfortunately, busy calendars and trips out of the country prevented the gathering from happening sooner.

There will be much to talk about; like much, much, much more debt.  According to the Congressional Budget Office (a nonpartisan agency charged with providing budget and economic information to Congress), our nation reached its statutory debt limit in January, and the Treasury has recently been taking “extraordinary measures” to not violate the borrowing cap. This has been complicated further because tax receipts through April were less than the Congressional Budget Office (CBO) anticipated.  Perhaps this is because some states, including California, were allowed to file late due to natural disasters. 

Whatever the cause, more debt will have to be issued when the negotiations are over.

The CBO makes projections each year for the American economy and budget.  Around this time last year, they anticipated fiscal 2023 would be in the red by almost one trillion dollars.  Now that they’ve had more time, the organization expects this year’s deficit to be closer to $1.4 trillion.  Further, they believe the average deficit annually from 2024-2033 will be $2.0 trillion!

Underpinning the presumptions above are the CBO’s thoughts on the economy and inflation.  They now believe the nation’s growth rate for all this calendar year will be 0.1 percent.  This suggests that the rest of 2023 will be a struggle as the first quarter’s initial tally for growth came in at 1.1 percent on an annualized basis according to the Bureau of Economic Analysis.  From 2024-2027, however, they expect the rate to average 2.4 percent.  Higher-than-wanted inflation will also be here for a few more years according to their forecasts; they don’t see inflation reaching the Federal Reserve’s target of 2.0 percent until 2026.  Fortunately, they do not think it remains as elevated as it is now but will instead meander lower.

No forecast is perfect, and they all get less accurate the further into the future they reach.  The CBO has a solid reputation and a staff of about 250 who try to be objective about the state of things.  As time presses on, they’ll update these number further, and from time-to-time Atlas will keep you posted, especially in times like now with so much happening in the nation’s capital.