Home Personal Finance The Imminent Federal Budget Deficit: America’s Impending Crisis Analyzed by Paul Fanlund

The Imminent Federal Budget Deficit: America’s Impending Crisis Analyzed by Paul Fanlund

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The Imminent Federal Budget Deficit: America’s Impending Crisis Analyzed by Paul Fanlund

Fiscal Policy Challenges Facing the Next Presidential Administration

Granted, good news has been scarce in the nation and across the world lately.

Twenty months of images of war from Ukraine and recent ones showing death and suffering in Israel and Gaza are heartbreaking.

Our nation refuses to regulate assault weapons even as mass killings become regular occurrences.

Poll numbers for a competent, centrist Democratic president overseeing a humming economy are vexingly low.

And the Republicans’ recent choice of an obscure religious zealot to be speaker of the U.S. House of Representatives — second in line to the presidency — again proves that party’s unbroken fealty to Donald Trump.

The Looming Budget Crisis of 2025

Now comes a national expert who wants to warn us that in 2025, no matter who is elected president, our budget deficit issue will assume emergency proportions that rival climate change.

That’s my shorthand summary of the message an expert from Washington, D.C., will deliver at the Tommy G. Thompson Center for Public Leadership at the University of Wisconsin-Madison on Nov. 14. In-person or virtual admission is open to the public, but registration is required.

The Expert Opinion

The speaker of the event will be Mike Murphy, longtime chief of staff for the Committee for a Responsible Federal Budget. His nonpartisan group has fought budget deficits since the 1980s, and he will discuss the fiscal policy challenges that will face the next presidential administration.

The Urgency for Action

He urges us not to descend into irretrievable cynicism. We should look beyond the “bothsidesism” and “false equivalencies” of blame so central to today’s political ecosystem and look to save the country, in part by modifying safety-net programs.

The Comparison to Climate Change

In my interview, Murphy likened the trajectory of the federal budget that will face the next president and Congress to the kind of existential threat we face with climate change.

The Need for Bipartisan Commissions

He acknowledged that cutting spending and raising taxes, both probably necessary, remain political anathema. Our best hope, he said, is creating special bipartisan commissions to make expert recommendations on specific issues.

The Future Budget Crisis

So what, exactly, is this 2025 budget crisis awaiting the next president? Here are Murphy’s bullet points:

  • Record debt levels: Debt held by the public is on course to reach a record 107 percent of gross domestic product by the end of 2029. That would exceed a record set just after World War II.
  • Growing interest costs: Over the next presidential term, interest will be the fastest-growing part of the budget. Interest costs are projected to exceed total defense spending by 2027.
  • Looming trust fund insolvency: The Medicare Hospital Insurance trust fund is projected to run out in 2031, and Social Security’s old-age trust fund will run dry two years after that. The current path leads to automatic, across-the-board cuts upon insolvency.
  • Major expirations and the risk of extensions: In October 2025, statutory caps on appropriations will expire. By the end of 2025, major provisions of the Republican tax cuts of 2017 and the recent expansion of Affordable Care Act health insurance subsidies will expire. If those tax cuts are extended, trillions would be added to the debt.

The Impact of Past Policies

Ah, I can guess what you centrists and progressives are thinking.

It was then-President Donald Trump and his congressional allies who pushed through the euphemistically titled “tax cuts and jobs act” that dramatically reduced revenue and made all of this much worse.

The Challenge of Bipartisan Solutions

Murphy acknowledges the huge challenge of convincing Americans, and especially centrists and progressives in his Madison audience, that a responsible bipartisan solution is possible.

The Urgent Need for Action

“Here’s what’s different now,” he told me. “These fiscal challenges are really here. In the past, we were kind of warning about a long-term problem. … We’re facing a massive demographic wave that’s just putting big pressures on parts of the federal budget, and we have an inadequate revenue stream to keep up with it.”

Conclusion

“No matter who is elected president next, they’ve got some serious fiscal challenges that are going to have to be addressed,” Murphy concluded.

Hard to imagine, I observed, that Murphy and his organization make many friends in Washington, D.C. He chuckled in agreement: “We call it as we see it at all times, and it does not make us friends a lot of the time,” he said. “You might have friends one month and three months later you don’t.”

Telling politicians that Social Security and Medicare might need to be less generous and that taxes should also be increased seems like a prescription for making enemies all around.

As Murphy puts it: “For a bipartisan, nonpartisan organization, in this environment, it is really, really tough.”

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