Answer: It's a lot of money too balance, so therefore, not all of it can balance out in the end.. A lot too read in the explanation, but well worth your time if you're really wanting to learn more about why the Government's budget can't balance out.
Explanation: Almost everyone has a simple cure for America’s stubborn budget deficits: faster economic growth. The Trump administration is particularly keen on this. It argues that its proposed tax reductions and regulatory cuts will accelerate economic growth and shrink the deficits. No doubt faster growth would help. But a more realistic appraisal is that, even with accelerated growth, huge gaps would remain between government spending and taxes. As the White House presents its first full budget (segments were released earlier), this is worth emphasizing. It suggests that only unpopular tax increases and spending cuts will bring the budget close to balance. There’s no magic in faster growth. Indeed, the focus on speeding up economic growth may distract attention from the harder questions of what government should do and who should pay for it. Not just Medicaid and food stamps, but Social Security, other programs and higher taxes should also be on the table. No one denies that U.S. economic growth lags post-World War II trends. From 1950 to 2016, the economy grew an average of 3.2 percent annually, reports the Congressional Budget Office (CBO). But growth has dropped to about 2 percent annually since 2010. Though this one percentage point difference in growth rates sounds small, it isn’t. In an $18 trillion economy, one percentage point of output is worth an extra $180 billion. That’s forgone income that could be split between the government and private households. In its latest forecast, the CBO projects that the economy will grow at only a 1.8 percent annual rate from 2017 to 2027. Treasury Secretary Steven Mnuchin has argued that the administration’s policies could boost this to 3 percent, roughly equaling the postwar average. Many economists are skeptical, because slower growth stems from two hard-to-change trends: 1) the massive retirement of baby-boomers, which reduces the workforce; and 2) weak productivity gains — businesses are struggling to become more efficient. A new report from the nonpartisan Committee for a Responsible Federal Budget concluded that restoring 3 percent annual growth would be enormously difficult, though not impossible. In a press briefing, Marc Goldwein of the CRFB said the economy would have to revert to its 1990s performance, with stable economic policies, widespread technological advances and high rates of immigration. Still, let’s assume for argument’s sake that the economy hits 3 percent annual growth. How does this affect the budget? Although it’s good news, it’s less than you might think. Buried in the CBO’s annual report on the budget outlook are estimates of how shifts in economic conditions affect the budget. Crude calculations indicate that attaining 3 percent economic growth might reduce budget deficits by $3 trillion over a decade. That’s a lot of money, even by Washington standards. Still, it’s only about a third of the $9 trillion increase in federal debt — the cumulative total of annual budget deficits — estimated over the same decade. The message here is not that economic growth is bad. It is that even using optimistic assumptions, faster growth by itself won’t eliminate deficits. The fundamental choice remains: Either we tolerate huge deficits indefinitely or we decide which taxes to raise and which programs to cut.
