America's deficit won't shrink

The Congressional Budget Office’s updated baseline confirms that the United States is operating on an unprecedented, structural fiscal trajectory. Even without new legislative initiatives, the federal budget deficit is projected to surpass $1.5 trillion in 2024 and compound toward $2.6 trillion over the coming decade, driven entirely by mandatory entitlements and soaring debt interest.

The Structural Deficit Trap

Neither major political party possesses the institutional will to confront the fiscal arithmetic. Republicans refuse to consider tax increases, while Democrats reject reforms to Social Security and Medicare. With the cost of sovereign debt service compounding at five-per-cent interest rates, the United States is trapped in a mechanical debt spiral that guarantees an unending avalanche of Treasury supply.

America’s multi-trillion-dollar fiscal deficit has ceased to be a cyclical phenomenon; it is a structural institutional addiction that will keep sovereign term premia elevated for a generation.