‘Rosy' Budget Assumptions Might Increase National Debt Says Think Tank

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The current congressional budget process reportedly is reaching back to a 2017 playbook to provide cover for irresponsible spending. It involves pretending that a desired course of action will magically result in high economic growth. A view to history shows this is most unlikely to happen.

Reconciliation is a narrow type of action that is only allowed to deal with spending, revenue, or the federal debt limit. The Senate gets one chance at a reconciliation bill for each of these in any given year. The so-called Byrd Rule prohibits an increase of federal debt over a 10-year period or from a change to Social Security. Critically, the reconciliation process only needs a simple majority to pass the bill. No filibuster is allowed, so the majority party can usually have its way.

The theoretical 10-year period without an increase in federal debt is difficult to meet, especially when the intent is to increase net expenditures. Without significant defections on a vote, the party in power will have its way. However, it still must show the bill will not increase the debt. Assumptions can make or break the argument.

It was part of their argument that major tax cuts would pay for themselves. They didn't and the result was trillions of dollars of additional debt.

Except for 2021, which showed high growth given the depressed economic baseline of the pandemic, the last time the U.S. saw GDP growth over 3% was in 2005 in the overheated run-up to the Great Recession. There were periods of higher growth before but under significantly different conditions.

As PGPF noted, 3% GDP growth has happened only four times in the last 25 years and higher growth typically happened after recessions, not during stable economic times, so this seems historically unlikely.