Politicians argue about whether the U.S. has a revenue problem (taxes too low) or a spending problem (spending too high), but in historical context, it looks like the answer might be “both.”
The fiscal hawks at the Committee for a Responsible Federal Budget say that in 2020, “spending will be higher and revenue will be lower than their historical averages by about the same amount: 0.8 percent of GDP.”
Absent significant change by Congress, that situation is likely to persist for years to come as spending on health care and retirement rises in the wake of the aging Baby Boomers and revenues remain relatively flat, especially in the most likely scenario, in which the individual tax cuts from the Tax Cuts and Jobs Act are maintained past 2025.
