Unexplained tax revenue growth upsets budget managers

Some of the CBO’s spending assumptions are probably not realistic. By law, the agency must assume emergency spending for things like the war in Ukraine continues in perpetuity. It also assumes that Congress will reauthorize the Infrastructure Act at equally high levels after its key provisions expire; it’s unclear what the appetite of lawmakers will be for another massive infrastructure deal like the $830 billion the CBO estimates Congress shelled out last year.

Still, with likely tax cut extensions on the horizon, it stands to reason that deficits and debt could be larger than the CBO’s current estimates. And the long-term picture isn’t pretty either, with an aging population and no response to rising health care costs. But as we’ve seen over the past year, there’s always the possibility of some kind of “unexplained” intervention that upends conventional wisdom about the picture of the federal budget.

Debt limit

One final piece of good news from the CBO report, depending on where you stand politically: Soaring incomes could push back the time when lawmakers absolutely have to face the statutory debt ceiling or the Treasury will have to risk failing to fail to meet its obligations.

The CBO forecast has debt subject to a limit, which encompasses “intra-government” debt owed to federal trust funds as well as debt held by the public, reaching nearly $31.8 trillion by the end of the next fiscal year. , September 30, 2023. This means that by the middle of next year, the Treasury could reach the current debt limit, which is just under $31.4 trillion.

But there are still “extraordinary measures”, such as the suspension of investments from certain trust funds, as well as high cash balances that could be depleted, which could push the moment of truth to the end of 2023, in theory. With Republicans looking likely to control one or both chambers next year, an extended track for the GOP and Chairman Joe Biden to find a solution could be the safest thing for the global economy and financial markets. .