Former US Treasury Secretary Larry Summers says America is walking a precarious path as the nation’s budget deficit reaches $1.613 trillion.
Speaking in an interview with Bloomberg at the Aspen Economic Strategy Group Summit, Summers says that everything is suggesting that the US’ costs are about to vastly overshadow its revenue, creating a larger and larger deficit as time unfolds.
Summers says that estimates for future US deficits are significantly undershooting the mark, and that a deficit near 10% of GDP is most likely on the table.
“I have written and said that I don’t think we’re on a sustainable fiscal path. I think the Congressional Budget Office is pretty pessimistic. It thinks the deficit is going to be in the 7% range once we get out eight or 10 years. They think we’re going to be reducing defense spending relative to GDP, I think that’s wrong given the threats we face.
They think that treasury bill interest rates can average in the low twos, I think that’s not close to right given the strains we face. They assume – because they’re required to – that all of the Trump tax cuts will phase out. I don’t think that’s going to happen. They haven’t really fully recognized that revenues are coming in well below expectations. This year, I think if you do the forecast right, you’re looking at a number close to 10.
I don’t think the United States is going to tell bond holders they’re not getting money. I think the fact that we worked through an incredible toxic political environment, the debt limit settled that issue I look at so called credit default swaps on the United States and they haven’t moved.”
The Treasury’s latest numbers reveal a $221 billion deficit for July of 2023 due to a contrast between the US’ $497 billion worth of outlays and only $276 billion in revenue.
The Treasury’s report shows that $67 billion, or 13% of the US’ total costs are going toward paying interest on its own debt.
The Treasury’s data shows that the US has spent $561 billion on debt interest so far this year, enough to cover the entire amount spent on education and transportation alone.