The federal government is on track to have a $1 trillion deficit in 2020 — and to continue running yawning deficits for years to come, the nonpartisan Congressional Budget Office predicted Monday.
It’s a report that should make Americans concerned, especially younger ones.
On a basic level, this means the U.S. government is spending way more money than it brings in. This is not a new problem. The United States has been running a deficit every year since 2002, but the situation is about to get really ugly. The country has never run this high of a deficit during good economic times. If spending keeps up at this pace (and there is every indication that it will), President Trump and his successors are going to have less flexibility to pump up the economy during a downturn or even a crisis.
“This is unprecedented,” said Justin Bogie, senior policy analyst on fiscal affairs at the conservative Heritage Foundation.
It doesn’t mean the economy or stock market will crash tomorrow. The United States is able to run such high deficits because the U.S. Treasury turns around and sells U.S. debt to investors around the world. Right now, a lot of people want to buy U.S. government bonds, even though America already has $15 trillion in debt owned by the public. But the problem is no one knows when people might say enough is enough and stop buying U.S. debt — or demand much higher rates of return.
Even if the nightmare scenario doesn’t materialize, deficits are a drag on the economy. Investors opt to buy government debt instead of making the type of private investments that create jobs or raise wages, economists warn.
Didn’t Obama run a $1 trillion deficit? Some may recall that the U.S. government ran trillion-dollar deficits each year from 2009 to 2012, but that was during a terrible economic period when America (and much of the world) was trying to climb back from the global financial crisis and ensuing recession. The government spent heavily to try to revive the economy.
Now growth is healthy, unemployment is extremely low (4.1 percent) and confidence is strong. In times like these, the U.S. government has almost always narrowed the budget deficit — or even runs a surplus, as it did from 1998 to 2001, the end of the dot-com boom. But instead of improving the government’s budget situation, Congress is going the opposite direction and adding to it.
“We are running up the national credit card when everything is going our way economically,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “It shows Congress has lost any will to make hard choices to fix near-record debt levels we’re already facing.”
What it means for you. To underscore how large the debt is getting, the CBO notes that by 2028, the debt held by the public will be at the highest level (as a percent of the U.S. economy) since World War II.
A day of reckoning is likely to come at some point where the United States will have to raise taxes or cut benefits and programs that many people have come to rely on — or some combination of both.
Many Americans under 50 are likely to face some pain from this, and the under-35 population will likely be especially hard-pressed to pay more to the government while getting back far less than their parents and grandparents did. Spending on everything from Social Security to roads, research and schools could potentially decline.
How worried should I be? The U.S. government hasn’t tested that level of debt — where debt held by the public equals the entire size of the U.S. economy — in the modern era. That’s why so many economists, from the left and right, have been warning Congress and the White House to act now before it gets that bad.
“The bigger the debt, the bigger the chances of a fiscal crisis,” CBO Director Keith Hall said Monday. “When do you start to fix a thing like this? The longer you wait, the more draconian the measures have to be to fix the problem. That’s the biggest warning.”
One of the places the U.S. government typically looks at first to cut back on is so-called “discretionary spending,” which means spending on education, housing for the poor, veterans benefits, scientific research, roads and bridges and other infrastructure, etc. The problem is that the CBO forecasts that, a decade from now, America’s interest payments alone will exceed discretionary spending on all nonmilitary items combined. That means it’s going to be harder and harder to find money in the budget to cut because the government can’t stop paying interest (unless it wants to default, which would likely trigger even worse economic consequences).
Why do we have this problem? The United States, like many advanced economies, has an aging population (the share of people over age 65 is double what it was half a century ago). That means more spending on programs for the elderly, such as Social Security, Medicare and Medicaid. It also means fewer workers with jobs who are paying taxes to support all the older Americans. That’s a major driver of the deficits, but on the campaign trail, Trump said he would not touch Social Security or Medicare.
The government’s other major expenditure is on defense, part of maintaining its military supremacy. The Trump administration has pushed for large increases to military spending, seeking to build it up again after modest declines at the end of the Obama administration.
While Trump campaigned on reducing the debt, he and the GOP-led Congress have made the deficit worse in the past year, according to the CBO calculations. The massive tax cut, especially for corporations, is expected to cut government revenue by $1.3 trillion over the next decade, the CBO says. After taking into account rising interest rates, the tax bill passed in December will cost the country $1.9 trillion over that time period.
Then there’s the budget bill Congress just passed. It increased spending by about 10 percent for both the military (a GOP priority) and domestic programs (a Democratic priority).
The CBO added it up: What Trump and Congress have done since June is “estimated to make deficits $2.7 trillion larger than previously projected” in the next decade, the CBO wrote in its report.
What can be done about it? Various bipartisan coalitions over the years, most notably the Simpson-Bowles panel in 2010, laid out a path to address the debt that was attractive to many centrists: Make most Americans wait longer before they can collect Social Security. Raise taxes a bit (this could be anything from raising the Social Security or Medicare tax to imposing a tax on carbon or a special millionaires tax), and look for ways to trim Medicare and Medicaid spending by striking harder deals with providers and/or limiting some types of treatments.
These are not popular changes. But neither is getting into an economic crisis because the U.S. government has overspent so much for so long. Or facing a situation where millennials and younger generations have to pay off the debts of their parents and grandparents.
The Social Security Trust Fund for older Americans is projected to run out of money in 13 years, according to the latest CBO estimates. After that, the Social Security program will still have some money coming in, but not enough to pay full benefits for everyone. The Highway Trust Fund is expected to go broke by 2022, and the Social Security disability insurance program fund would be insolvent by fiscal year 2025, the CBO says, unless Congress takes action.
Some conservatives have argued for steeper cuts to social programs, while progressives tend to eye big cuts to military spending.
Congress and the Obama administration agreed in 2013 to what was known as “budget sequestration.” The idea was to impose mandatory caps on both social and defense spending that would go in place unless both parties came together on a long-term budget deal. The two sides never reached a deal, and so the caps went into place, driving down deficits during the final years of the Obama era.
Balanced-budget amendment? Another solution that has been floated is a balanced-budget amendment. Republicans in Congress plan to vote on it this week, although almost no one expects it to pass. It’s likely a symbolic vote for some lawmakers who want to try to show they are doing something to rein in the debt.
Many states have these, and there are calls to see if it’s possible to do one at the federal level, although it would require a change to the U.S. Constitution, a difficult process. It would also eliminate some aid to the economy in times of crisis. During and after the Great Recession, many states had to pull back spending sharply, cutting money for schools and, in some cases, having to lay off workers at a time when so many Americans were already struggling to find work. This situation can exacerbate downturns.
While many agree something needs to be done to get America’s budget back to a healthier level, even the so-called “budget hawks” look at the vote this week and shake their heads.
“Every person who supports the balanced budget amendment should be required to actually put forward a budget that balances,” said MacGuineas. “Congress certainly made terrible policy choices in past couple of months, starting with the gallingly irresponsible tax cut.”
For at least a year, the biggest page on Facebook purporting to be part of the Black Lives Matter movement was a scam with ties to a middle-aged white man in Australia, a review of the page and associated accounts and websites conducted by CNN shows.
The page, titled simply “Black Lives Matter,” had almost 700,000 followers on Facebook, more than twice as many as the official Black Lives Matter page. It was tied to online fundraisers that brought in at least $100,000 that supposedly went to Black Lives Matter causes in the U.S. At least some of the money, however, was transferred to Australian bank accounts, CNN has learned.
Fundraising campaigns associated with the Facebook page were suspended by PayPal and Patreon after CNN contacted each of the companies for comment. Donorbox and Classy had already removed the campaigns.
The discovery raises new questions about the integrity of Facebook’s platform and the content hosted there. In the run-up to Facebook CEO Mark Zuckerberg’s testimony before Congress this week, Facebook has announced plans to make the people running large pages verify their identity and location. But it’s not clear that the change would affect this page: Facebook has not said what information about page owners it will disclose to the public — and, presented with CNN’s findings, Facebook initially said the page didn’t violate its “Community Standards.”
Only after almost a week of emails and calls between CNN and Facebook about this story did Facebook suspend the page, and then only because it had suspended a user account that administrated the page.
The discovery also raises questions about Facebook’s commitment to change, and to policing its platform, even in the midst of its PR offensive leading up to Zuckerberg’s testimony. Not for the first time, Facebook took action against a major bad actor on its site not on its own but because journalists made inquiries.
Indeed, Facebook was told of concerns about the page some time ago. Patrisse Cullors, a co-founder of the Black Lives Matter movement, told CNN that Black Lives Matter had, suspecting the page was a scam, contacted Facebook about removing it a few months ago.
Almost 700,000 users followed the page, which was not disabled by Facebook until several days after CNN brought it to the company’s attention.
The Facebook page was — separate from Facebook’s suspension of it — apparently taken down by a person who administrated the page shortly after CNN contacted one of the Australian men who may be associated with it. “Black Lives Matter” appears to have been set up some time in 2016.
The people behind the page also ran a hugely popular Facebook Group also titled “Black Lives Matter.” With almost 40,000 members, it appears to be the biggest group on the platform professing to be supporting Black Lives Matter. Facebook Groups are similar to traditional discussion forums, and unlike pages, people normally need to request to join.
The page consistently linked to websites tied to Ian Mackay, a National Union of Workers official in Australia. The union represents thousands of workers across various industries.
A spokesperson for the National Union of Workers said Tuesday that it has suspended Mackay and one other official while it investigates the situation.
The union “is not involved in and has not authorized any activities with reference to claims made in CNN’s story,” National Secretary Tim Kennedy said in a statement.
Mackay has registered dozens of websites, many on issues tied to black rights. In April 2015, Mackay registered blackpowerfist.com. Mackay’s name, email address, phone number and other details appeared in the registration records for the site until July 2015, when the website enabled a feature that allows site owners to hide their identities and contact information.
The Facebook page continually drove traffic to websites associated with blackpowerfist.com, which was eventually turned into a Reddit-like discussion forum. One of the websites included blacklivesmatter.media, for which Mackay is listed as the administrative and technical contact in at least one archived internet record.
A few days after Mackay registered blackpowerfist.com, an anonymous Facebook profile under the name “BP Parker” shared a link to the website. This same profile was an administrator of the “Black Lives Matter” Facebook page until the page was suspended, a Facebook spokesperson has told CNN.
Another anonymous account, under the name “Steve Parks,” linked to another site first registered by Mackay — again, just a few days after internet records indicate he registered it.
As recently as last month, both BP Parker and Steve Parks were listed as administrators on the Black Lives Matter Facebook group tied to the Facebook page.
The people behind the websites and the Facebook page also encouraged people to donate through various online fundraising platforms, including Donorbox.
“Our mission is to raise awareness about racism, bigotry, police brutality and hate crimes by exposing through social media locally and internationally stories that mainstream media don’t,” a message on the group’s Donorbox page read.
“We have built a following through hard work, dedication and the generosity of supporters like you that pitch in a what they can to help us promote or share our page and also pay to boost the stories the mainstream media try to suppress through paid ads,” it added.
Facebook did not comment when asked if ads were purchased to boost the page on its platform.
Another fundraiser removed by Donorbox, which the company confirmed was run by the same people, billed itself as an “Education And Training Portal Sponsorship Fund” that promised “online courses that educate people about the struggle of civil rights leaders and activists.”
Fundraisers also ran on PayPal, Patreon, and Classy.
A source familiar with some of the payments processed said at least one of the accounts was tied to an Australian IP address and bank account. At least one fundraising account was tied to Ian Mackay by name, according to the source.
Another source also familiar with some of the payments processed told CNN that the group had raised around $100,000 that they were aware of. The source also said the fundraisers were linked to Australia.
Both sources spoke on the condition of anonymity because their companies’ policies prohibit the sharing of some information about fundraisers.
The websites associated with the group are currently registered using common features that keep the identity and contact information for the people behind the website private.
CNN reached out to Mackay last month to ask about his involvement with the “Black Lives Matter,” Facebook page. He denied running it. “I once bought the domain name only and sold it,” he told CNN when asked about a Black Lives Matter website that was once registered to his name.
Within a few hours, the Facebook page had been deactivated.
It wasn’t the first time the Facebook page changed after Mackay was asked about his involvement in it.
In December, after a freelance investigator, Jeremy Massler, who was the first person to publicly note Mackay’s apparent links to the page, wrote a blog post about Mackay, the page was taken down for a brief period before re-emerging.
Massler reached out to CNN about the Facebook page following CNN’s reporting on fake Black Lives Matter pages run by a Russian government-linked troll group. Massler pointed CNN to the internet records for websites linked to by the page.
After an investigation of its own, CNN presented its findings to Facebook last week. Despite CNN outlining the page’s links to fundraising accounts that had by then been suspended on other platforms, Facebook initially said its investigation into the page “didn’t show anything that violated our Community Standards.”
On Monday morning, Facebook disabled the BP Parker profile for violating its community standards. The company disabled the page as a result, a spokesperson told CNN.
The campaign’s accounts on Donorbox, PayPal, Classy, and Patreon have all been suspended.
Donorbox told CNN in an email, “This is an organization that we banned months ago. They signed up as the operator of a popular FB page and a BLM social news platform.”
“We banned the account after a couple of donors complained that they thought they donated to the grassroots organization.”
The company added that most of the donations came from people clicking links on Facebook and on websites run by the people behind the campaign.
One of the Donorbox campaigns that was active as recently as February of this year included an email address for Black Lives Matter Memphis. Pamela Moses, a spokesperson for Black Lives Matter Memphis, said her group had nothing to do with the fundraiser. Donorbox removed the campaign, the company told CNN.
Patreon and PayPal suspended the accounts after CNN asked the companies about them. Classy had already suspended the account on its platform as it didn’t make it through its approval process.
PayPal and Donorbox would not specify how much money was raised using their platforms. Patreon said only $194 was raised through their site.
Classy said that the campaign did not make it through its final approval process and no money raised was transferred to the people behind the campaign.
Mackay did not provide answers to multiple questions from CNN about his apparent links to the scheme. “My domain name buying and selling is a personal hobby,” he told CNN.
He declined multiple opportunities to clarify his role. “What is the point in speaking to you given that you are going to run your story either way,” he wrote in one message to CNN.
Cullors said she found CNN’s findings disturbing. She said fake fundraisers diminish the real work the movement does. “We rely on donors who believe in our work and our cause and that money will be used in a way that is respectful,” Cullors said.
“It’s important to remember the movement was organic and no organizations started the protests that spread across the country,” DeRay Mckesson, a prominent black activist, told CNN. “The consequences of that is it hasn’t been easy to think about authenticity in the digital space.”
– Carly Walsh contributed to this report.
Correction: An earlier version of this article incorrectly stated that Donorbox and Classy removed the fundraising accounts after CNN brought them to their attention. In fact, the accounts were removed before CNN brought them to the companies’ attention.
