🚨 New Analysis 🚨

Deficits and debt have exploded since 2001.

𝑩𝒐𝒕𝒉 𝒍𝒐𝒘𝒆𝒓 𝒕𝒂𝒙 𝑨𝑵𝑫 𝒉𝒊𝒈𝒉𝒆𝒓 𝒔𝒑𝒆𝒏𝒅𝒊𝒏𝒈 𝒂𝒓𝒆 𝒕𝒐 𝒃𝒍𝒂𝒎𝒆

@Budgethawks has the receipts to prove it - read here:

🧵crfb.org/papers/riches-… 1) Since 2001, the US turned a $128 billion surplus into a $1.7 trillion deficit a tripled debt-to-GDP to 98 percent.

We try to explain causes of this deterioration 2 ways:
1) By analyzing the cost of policy actions since 2001
2) By analyzing differences between 2001 & 2023

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🧵𝐖𝐨𝐧𝐤-𝐓𝐡𝐫𝐞𝐚𝐝🧵

With interest rates at a 16-year high and surging, it’s a good time to talk what 𝐑 𝐯𝐞𝐫𝐬𝐮𝐬 𝐆 means for debt dynamics.

In summary:
⦿ 𝐑<𝐆 improves debt sustainability
⦿ 𝐑<𝐆 doesn't guarantee sustainability
⦿ 𝐑>𝐆 now, so that's bad!

🧵 1) Let’s start with some basics…

R = the average interest rate in government debt.
G = the average growth rate of GDP.

For the last 15 years, and much of history, R has been below G (𝐑<𝐆).

That’s good for debt sustainability, but it might be over.

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🚨We have a new paper on 𝙁𝙞𝙨𝙘𝙖𝙡 𝙋𝙤𝙡𝙞𝙘𝙮 𝙞𝙣 𝙖 𝙏𝙞𝙢𝙚 𝙤𝙛 𝙃𝙞𝙜𝙝 𝙄𝙣𝙛𝙡𝙖𝙩𝙞𝙤𝙣🚨

The tl;dr -- The Federal Reserve is and should be in charge if fighting inflation. But when things are this bad, fiscal policy should help.

🧵

crfb.org/papers/fiscal-… 1) The Federal Reserve should lead the fight against inflation.

@jasonfurman & Elmendorf explained, the Fed can

"Act quickly & effectively to adjust interest rates, using its technical expertise & political insulation to balance competing priorities"

brookings.edu/research/if-wh… 2/

Student debt analysis cancellation is NOT justified to rectify financial harm from COVID-19:
⚫Borrowers are already richer from COVID relief
⚫Delinquency spike claims are based on a math error
⚫Inflation erodes debt
⚫Cancellation is poorly targeted

crfb.org/blogs/student-… 1/ Remember, personal income was HIGHER in 2020 and 2021 than trend thanks to $6 trillion of COVID relief. And now unemployment is at a 50-year low.

The White House has bragged that “household finances are stronger than pre-pandemic."

We don't need debt cancellation.

🎂 HAPPY CBO DAY 🎂

The @USCBO is releasing their new “baseline” today at 2pm.

We expect it to show a one-time fall in deficits and debt-to-GDP, followed by perpetual increases.

A short 🧵 1) After running $3 trillion deficits in 2020 and 2021, the 2022 deficit will likely be closer to $1 trillion.

No one has enacted ‘debt reduction’ to achieve this.

The main reason for this drop is the expiration of most COVID relief - which cost ~$2 trillion in 2021.

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🚨🌍 NEW ANALYSIS🌍🚨 - A carbon tax would strengthen BBB's climate provisions. Together they could generate up to $900b of net savings and reducing emissions by 30%!

Via @BudgetHawks: crfb.org/papers/can-car…

THREAD. 1) Build Back Better would spend $550 billion to slow the effects of climate change, including $325 billion of tax breaks and $225 billion of spending.

According to analysis by @EnergyInnovLLC, this would reduce GHG emissions by 17% by 2030 - about half way the Paris target.

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