About the Debt Default Clock

TWO MINUTES TO MIDNIGHT: THE UPDATED FEDERAL GOVERNMENT “DEBT DEFAULT CLOCK”

The Default Clock Committee,
April 15, 2024

Beyond the troubling debt-ceiling standoffs we witness every few years, including last year, looms a far more dire threat. This is a true U.S. government default, which does not follow from a breach of the debt ceiling, that either way economists warn could also lead to a collapse of confidence in the American economy, a run on the dollar, and perhaps even a global economic meltdown.

How close are we to such a catastrophic federal default?

To answer this question, a group of private-sector economists and fiscal policy experts has formed a citizens’ committee, called the Debt Default Clock Review Committee, to maintain an objective, fact-based federal government Debt Default Clock. The Clock is designed to help the public to see and track the nearness of the danger. The Review Committee is continuing to use this Clock design. It completed the review prior to the one found here in April of 2023.

For the Committee’s purposes, “default” is defined simply as a failure by the U.S. Treasury to make a scheduled interest payment on just one direct U.S. Government obligation such as a Treasury note or bond. “Fiscal crisis” is defined as the point beyond which default becomes a virtual certainty.

Generally speaking, Congress has gotten in the habit of suspending the government’s statutory debt ceiling for periods of a year or two, during which time the Treasury may incur unlimited amounts of debt. It broke this habit in December of 2021 by enacting a dollar-denominated debt ceiling law (Public Law 117-73). Public Law 117-73 set the debt ceiling at just under $31.4 trillion. However, Congress reversed ground in 2023 with the enactment of the Fiscal Responsibility Act (Public Law 118-5). This new law suspends the debt ceiling law until the end of calendar 2024. Worse, Congress in the future may decide to repeal outright the debt ceiling law and President Biden could sign such a measure into law. This is something Treasury Secretary Janet Yellen recommended in 2021. Repealing the debt ceiling law does not eliminate the threat of a default. Indeed, to think that it would or could is akin to thinking we can be assured of perpetually sunny days if we simply destroy the barometer. The Biden Administration and Congress seem to be telling themselves: “If I just increase the credit limit on my credit card, I will never have to pay it off.”

This irresponsible view, unfortunately, was reinforced by the Federal Reserve’s actions taken in response to the pandemic in the course of 2020 and 2021. The Federal Reserve had taken the action of reducing interest rates, which also has the effect of reducing the average rate on the Treasury securities used to finance the federal debt. The Federal Reserve also dramatically expanded its holdings of Treasury securities during the same period. These actions were important contributing factors to the high rates of inflation in the months that followed. The spike in inflation forced the Federal Reserve to reverse ground by raising interest rates and reducing its holdings of Treasury securities. Unavoidably, these actions have increased pressure on the Treasury securities market.

Combined, these two steps by the Federal Reserve are serving to accelerate the onset of federal insolvency and ultimately default by dramatically increasing the government’s interest costs. Already, the Congressional Budget Office projects that cumulative federal government gross interest costs over the ten-year budget period (2024 through 2033) will reach almost $15 trillion. The structure of the Clock is designed to account for both the near-term and long-term effects of the Federal Reserve’s actions on the fiscal posture of the federal government.

The debt ceiling is the federal government’s most important fiscal barometer, and it should be treated as a ceiling by enacting budgets that prevent increases in the debt to the point that it would risk breaching the ceiling. Such an attitude would also eliminate the need for the Treasury to undertake extraordinary measures. The Review Committee hopes the Debt Default Clock will help the public to read the immediacy of the danger by showing in a clear and simple way how close the federal government is to default for reasons outside any statutory limit on the debt. Its purpose is to spur fiscal policy makers to change course before it’s too late.

The Twelve Tests

The Clock continuously measures twelve of the most relevant budget factors, or tests, each of which is framed as a simple yes-no question. At any given moment, the status of the twelve factors collectively determines the number of minutes from midnight the Clock stands at the time of its latest update. The number of minutes, of course, changes as time passes and new data is received. Each factor assesses not just where things currently stand, including the changes that have taken place since the April 2023 update, but also where things are projected to move over the course of the next ten years. Each of the twelve tests is objective. None is arbitrary or influenced by opinion.

Here are the twelve factors:

    1. Do federal outlays exceed 17.5 percent of gross domestic product (GDP)?
    2. Is there a U.S. dollar-denominated debt ceiling in law presently, and will the projected federal debt stay below that ceiling during the ten-year budget period?
    3. Does the debt held by the public exceed 70 percent of GDP, and does the gross federal debt exceed 100 percent of GDP?
    4. Do gross federal interest payments exceed 15 percent of federal revenues?
    5. Do gross federal interest payments, on a sustained basis, exceed 70 percent of the money the federal government brings in through the issuance of new debt?
    6. Does the ratio of debt held by the public exceed 80 percent of the gross debt?
    7. Does the debt held by foreigners exceed 50 percent of the debt held by the public?
    8. Is the structure of the debt, specifically regarding the dollar volume of the debt in Treasury inflation-protected securities (TIPS), Treasury Floating Rate Notes (FRNs), and other debt instruments that mature in five years or less, exceed 50 percent of all marketable Treasury securities?
    9. Are federal revenues below 17.5 percent of GDP?
    10. Is the rate of real U.S. economic growth, as measured in GDP, at 3 percent or above on an annual basis?
    11. Has Congress enacted a law prohibiting the Treasury from resorting to extraordinary measures in the future?
    12. Is Congress scaling back programmatic “mandatory spending” and eventually phasing it out?

    While economists and financial experts will readily appreciate the relevance of each of these factors, we realize that the public at large may find them confusing. For everyone’s benefit, the following is a detailed, plain-English explanation of each factor, together with its underlying data and assumptions.

    Warning: Default Ahead

    The federal government will reach fiscal crisi—the point of no return—when the federal government fails at least ten of the twelve tests set according to the questions listed above. As of now, the federal government is currently failing in eight of them. These are Factors 1, 2, 3, 4, 6, 8, 11, and 12. Four factors (Factors 5, 7, 9 and 10) qualify to buy one or two minutes from midnight each, based on the current circumstances and projections. However, the design of the Clock permits the Review Committee to discount up to two factors at any one time. As will be explained later, the Review Committee has chosen to discount one of these four factors. Therefore, as of today, the Debt Default Clock stands at just three minutes from midnight. This is one minute further away from midnight compared to where the minute hand stood at the time of the last review in April 2023. Specifically, the outcomes have declined in nine of the 11 non-discounted factors, although some in ways that do not lead to decreases in the minutes from midnight. In eight of these cases, the applicable factors were already failing to buy any time away from midnight. In one case, Factor 6, there was a decline from the previous review. This factor bought one minute from midnight under the April 2023 review, but it now buys zero minutes from midnight. This is because the ratio of the debt held by the public now exceeds 80 percent of the gross debt.

    As indicated earlier, the design of the Clock permits the Review Committee to discount up to two factors at any one time. On this basis, the Committee has decided to continue discounting Factor 7. Factor 7 measures the percent of federal debt held by foreigners. The current projections of foreign-held federal debt, as it did in the previous review, are that it will increase modestly in dollar terms over the next ten years but will decline relative to the total amount of debt held by the public. Thus, Factor 7 is currently not a significant contributor to the danger of federal fiscal crisis and default.

    Factors 5, 9 and 10 each buy one minute from midnight. Factor 5 continues to buy one minute from midnight because gross federal interest costs relative to the issuance of new debt are below 70 percent. It bought this one minute at the time of the April 2023 review. On the other hand, gross federal interest costs are growing dramatically, and in a way that they will exceed 70 percent of the money the federal government raises through the issuance of new new debt in 2027. Thus, Factor 5 is projected to lose its current one minute from midnight in that year. Factor 9 also now buys one minute from midnight, where it was a discounted factor under the previous review. Factor 9 measures the ratio of federal revenues to GDP. It was discounted in the previous review because at that time revenues met or exceeded 17.5 percent of GDP in every year of the budget period. It lost its discounted status because federal revenues now fail to meet or exceed 17.5 percent of GDP last year and in one of the years in budget period. In the case of Factor 10, it now buys one minute from midnight, where at the time of the previous review it bought zero minutes. Factor 10 measures the overall rate of U.S. real economic growth, as measured in GDP. It earned this minute because there was an unexpected surge in GDP in 2023. However, current CBO projections show that it will lose this minute by the end of the current year.

    Therefore, if the Review Committee decides to maintain the discount for Factor 7 and restore the discounted status for Factor 9 and sees a dip in the real rate of economic growth under Factor 10 in the future, the federal government will reach the circumstance of fiscal crisis and insolvency at some point in 2027 and ultimately default a short time later. This is because, as stated earlier, Factor 5 is projected to reach a point where gross federal interest costs exceed 80 percent of net new barrowing in the that year. However, it is essential to keep in mind that Factor 5, relative to all the other factors, is volatile. This means it could cross over to the wrong side of its threshold earlier than 2027. Finally, the longer it waits before taking the necessary steps to avoid fiscal crisis and default — which include reducing the rate of growth in spending, limiting the debt and better controlling interest costs — the more politically difficult and economically painful the steps to avoid fiscal crisis and default will become.

    The Debt Default Clock is ticking.

Databases behind ten of the factors of Debt Default Clock

Factor #1: Do federal outlays exceed 17.5 percent of GDP?

Federal outlays have been well above 17.5 percent of GDP every year since 2015. They peaked in 2020 at a level of over 31 percent of GDP because of the spending laws enacted in response to the coronavirus pandemic. Spending relative to GDP declined from this peak in 2021, 2022 and 2023. However, it is projected to start rising again in 2024. Current projections show that outlays will far exceed 17.5 percent of GDP in every year of the budget period. In the final year of the period (2034) outlays will be at 24.1 percent of GDP. Thus, Factor 1, as with the previous update of the Debt Default Clock, remains set at buying zero minutes from midnight. The data bases for this factor are as follows: 1) Congressional Budget Office, “Budget and Economic Data,” under the heading “Historical Budget Data” and subheading “Revenues, Outlays, Deficits, Surpluses, and Debt Held by the Public as a Share of GDP Since 1962 through the most recent year completed,” February 2024, here; and 2) Congressional Budget Office, “The Budget and Economic Outlook: 2024 to 2034,” February 2024, p. 10, here.

Factor #2: Is there a dollar-denominated debt ceiling in place, and if so, does the debt subject to limit stay under the ceiling during the budget period?

Congress put a dollar-denominated debt ceiling in place with the enactment of Public Law 117-73 in December of 2021. Public Law 117-73 raised the debt ceiling by $2.5 trillion, setting it at just shy of $31.4 trillion. However, Congress reversed itself in 2023 by enacting a law (The Fiscal Responsibility Act of 2023, Public Law 118-5) to suspend the debt ceiling through the end of 2024. At the time of the last update, Public Law 118-5 was still being debated in Congress. At the time, however, it was clear that Congress was moving toward the suspension of the debt ceiling law. Further, the Treasury Department was actively using “extraordinary measures” to evade the debt ceiling then in place. These two circumstances led the Review Committee to take away the one minute from midnight Factor 2 had earned because of the earlier enactment of Public Law 117-73. Under the terms of Factor #2, the Review Committee was now required to maintain the zero minutes from midnight that was imposed in April 2023. Given the current suspension of the debt ceiling, there is neither an applicable database nor accompanying chart for Factor #2 with this update.

Factor #3: Does the debt held by the public exceed 70 percent of GDP, and does the gross debt exceed 100 percent of GDP?

The current data on both the debt held by the public and the gross debt show that they have been in the past and will in the future exceed 70 percent and 100 percent of GDP, respectively. By the end of the budget period (2034) the debt held by the public is to rise to 116 percent of GDP. The gross debt is projected to be at 129.4 percent of GDP. Since both the debt held by the public and the gross debt already exceed 70 and 100 percent of GDP respectively by a wide margin and are projected to remain well above these thresholds, Factor #3, as was the case at the time of the prior review, buys zero minutes from midnight. Looking ahead, this factor will buy one minute from midnight if the debt held by the public and the gross debt are projected to fall below their respective thresholds at some time during the budget period. It will buy two minutes from midnight if in fact they fall below their thresholds and are projected to remain below them throughout the budget period. The data bases for Factor 3, whether provided directly or used to calculate the outcome, are as follows: 1) Congressional Budget Office, “The Budget and Economic Outlook: 2024 to 2034,” February 2024, pp. 10 and 14, here; 2) Congressional Budget Office, “Budget and Economic Data,” under the subheading “Historical Data and Economic Projections,” February 2024, here.

Factor #4: Do gross interest costs exceed 15 percent of federal revenues?

The most dramatic deterioration in the federal government’s fiscal position is now taking place with exploding interest costs. Gross interest costs in 2023 represented almost 19 percent of total revenues. This outcome stemmed from the related increases in inflation and interest rates. Factor 4 bought zero minutes from midnight at the time of the prior review in April 2023. Accordingly, this remains the case with this review. Further, the current projection shows the problem only grows worse over the ten-year budget period. In 2034, gross interest costs will represent close to one-quarter of all federal revenues. The data bases for this factor are as follows: 1) Department of the Treasury, “Interest Expense on the Debt Outstanding,” here (accessed March 10, 2024); 2) Congressional Budget Office, “The Budget and Economic Outlook: 2024 to 2034,” February 2024, p. 10, here; 3) Congressional Budget Office, “Budget and Economic Data,” under the heading “Historical Budget Data” and subheading “Revenues, Outlays, Deficits, Surpluses, and Debt Held by the Public Since 1962 through the most recent year completed,” February 2024, here; and 4) and under the heading “Spending Projections by Budget Account” (specifically Line 1920, “Interest on Treasury Debt Securities (gross)”), February 2024, here.

Factor #5: Do gross federal interest payments, on a sustained basis, exceed 70 percent of the money the federal government brings in through the issuance of new debt?

The July 2022 update of the Debt Default Clock resulted in the Review Committee determining there is a sustained pattern of increasing federal interest payments relative to the money brought into the federal government by the issuance of new debt. On this basis, the Review Committee awarded Factor 5 with buying one minute from midnight on the Clock. This sustained pattern continued in 2023. It also finds that this pattern is continuing into 2024 and results in a projection that gross interest costs will exceed the threshold of 70 percent of new debt in 2027, as was the case in the previous update in April 2023. However, it is essential to point out two things about Factor 5. First, the explosion in projected gross federal interest costs makes it highly likely that it will remain on this sustained path that leads to those interest payments exceeding 70 percent of the money the federal government raises through the issuance of new debt. Second, Factor 5 is the most volatile of the factors behind the Clock and could reach the projected threshold earlier than 2027. For example, this update shows that gross federal interest costs could exceed 60 percent of new debt in the current fiscal year (2024), whereas in the previous year it stood at a bit more than 40 percent. The data bases use for calculating this factor are: 1) Office of Management and Budget, “Historical Tables,” Table 7.1, “Federal Debt at End of Year:1940-2028,” March 11, 2024, (accessed March 20, 2024) here; 2) Congressional Budget Office, “The Budget and Economic Outlook: 2024 to 2034” February 2024, p. 14, here; 3) Government Accountability Office, “Financial Audit: Bureau of the Fiscal Service’s FY 2023 and FY 2022 Schedules of the Federal Debt,” p. 19, here; and 4) Congressional Budget Office, “Budget and Economic Data,” under the heading “Spending Projections by Budget Account” (specifically Line 1920, “Interest on Treasury Debt Securities (gross)”), February 2024, here.

Factor #6: Does the debt held by the public exceed 80 percent of the gross debt?

Factor 6 measures what is currently projected to be an increasing share of the gross federal debt that must be financed by investors outside the federal government (“debt held by the public”), as opposed to trust funds maintained by the federal government itself. This greater reliance on debt held by the public increases the pressure on the Treasury to attract investors to finance the debt. The Debt Default Clock estimates that the debt held by the public will exceed 80 percent of the gross debt near the end of the current fiscal year (2024). As a result, Factor 6 buys no longer buys the one minute from midnight that it bought in April 2023. Further, the projection under Factor 6 shows that the ratio will climb in every year of the budget period. The projected data base for this factor is found at: Congressional Budget Office, “The Budget and Economic Outlook: 2024 to 2034,” February 2024, p. 14, here. The historical data is found at the Office of Management and Budget, “Historical Tables, Table 7.1, Federal Debt at the End of the Year: 1940-2028,” March 11, 2024, here.

Factor #7: Does the debt held by foreigners exceed 50 percent of the debt held by the public?

As with the April 2023 update of the Debt Default Clock, this update shows that the dollar value of the debt held by the public owned by foreigners is projected to remain well below 50 percent of all the debt held by the public throughout the ten-year budget period. This is because in recent years the rate of growth in the dollar level of foreign-held federal debt, which in general continues to grow, is also moving in the direction of making up a smaller portion of all debt held by the public. The increase in the value of foreign-held Treasury securities is not keeping up with the rapid and large-scale increases in the broader debt held by the public. In terms of actual data, as opposed to projected data, during the five-year period covering fiscal years 2018 through 2022, the dollar value of foreign-held debt was up by 15 percent, while the debt held by the public rose by 65 percent. Accordingly, the Clock’s projection shows that foreign-held federal debt will fall to a bit more than 21 percent of all the debt held by the public at the end of the 10-year budget period in 2034. This means that Factor 7 would have continued to buy two minutes away from midnight, but the Review Committee has decided to extend its earlier decision to discount Factor 7. It continues to believe this trend will lessen the risk that foreign powers will be able to weaken the financial and political position of the federal government by taking advantage of the government’s foreign debt exposure. The data bases for this Factor are: Department of the Treasury, “Ownership of Federal Securities,” at here (accessed on February 20, 2024); 2) “Congressional Budget Office, “The Budget and Economic Outlook: 2024 to 2034,” February 2024, p. 14, here; and 3) Congressional Budget Office, “Historical Budget Data,” in the category entitled “Revenues, Outlays, Deficits, Surpluses, and Debt Held by the Public, Since 1962,” February 2024, here.

Factor #8: Will short-term maturities and floating rate obligations of the Treasury decline from the 2018 level of 73.1 percent of all marketable Treasury debt?

The Monthly Statement of the Public Debt of The United States (the “Monthly Statement”) describes six types of securities comprising the marketable Treasury debt outstanding. They are Treasury Bills (“Bills”), Treasury Notes (“Notes”), Treasury Bonds (“Bonds”), Treasury Inflation-Protected Securities (“TIPS”), Treasury Floating Rate Notes (“FRN’s”) and Federal Financing Bank (“FFB”) securities. The Monthly Statements, including attached spreadsheets, are available at MonthlyStatementPublicDebt_Entire_202402.pdf (accessed March 12, 2024) Treasury Bills are short-term obligations with a maturity of less than one year. Treasury Notes are issued with maturities of between one and ten years. Treasury Bonds are issued with maturities longer than ten years. For the purposes of the Debt Default Clock, on any given date, all Bills and previously issued Notes and Bonds maturing within five years of that date, along with all TIPS and FRN’s, which are adjustable-rate securities subject to periodic adjustments in their interest rates, are categorized as short-term maturities and floating rate obligations (“STMFROs”). The Monthly Statement does not provide the maturity dates for FFB securities, but generally describes them as long term. Thus, they are not included in STEMFROs and set aside here.

As of February 29, 2024, all the STMFROs constituted 71.1 percent of all the marketable Treasury debt outstanding, as measured in dollars. This structure of the marketable debt jeopardizes the financial position of the Treasury by leaving it vulnerable to increases in both the inflation rate and interest rates. In fact, much of the damage stemming from this structure of the debt has already been incurred. This is because, as shown with Factors 4 and 5, federal interest costs have already exploded and the interest rates on Treasury securities sold at auction remain high compared to several years ago. It is the view of the Debt Default Clock Review Committee that the portion of all Treasury marketable securities made up by the STMFROs, as measured in dollars, should be reduced to 50 percent of the total. Factor 8 of the Debt Default Clock will move the minute hand one minute away from midnight for every five percentage points reduced from the 71.3 percent of marketable securities that constituted the STMFROs at the end of fiscal year 2018. While Factor 8 has moved in a positive direction compared to the previous update, it remains well short of the improvement that would buy one minute from midnight. Further, it would serve the financial interest of the federal government to sell larger amounts of longer-term notes and bonds if interest rates start dropping in the future.

It is important to note that the Review Committee also continues to monitor the bid-to-cover ratios at auctions for four select Treasury securities. These are the 26-week bill, the 10-year note, the 30-year bond and the 10-year TIPS. These bid-to-cover ratios compare the amount of money investors bid on the applicable security at auction to the amount of money the Treasury is seeking to raise at the same auction. A persistent or rapid decline in the bid-to-cover ratios would likely signal a growing loss of confidence by investors in the ability of the federal government to manage its debt. As of the end of end of February 2024, the data reveal reasonably steady bid-to-cover ratios in each of these four securities since the time of the last update in April 2023. Generally, the average ratio is about 2.5 to 1. While the ratios here are not being incorporated into Factor 8, they will be used as a secondary source for informing the Review Committee of any emerging problems resulting from the structure of the federal debt.

Factor #9: Are federal revenues below 17.5 percent of GDP?

The data bases for Factor 9 are found at: 1) Congressional Budget Office, “Budget and Economic Data,” under the heading “Historical Budget Data” and subheading “Revenues, Outlays, Deficits, Surpluses, and Debt Held by the Public as a Share of GDP Since 1962 through the most recent year completed,” February 2024, here; and 2) Congressional Budget Office, “The Budget and Economic Outlook: 2024 to 2034,” February 2024, p. 10, here.

Federal revenues were at 16.5 percent of GDP in 2023, well below the 17.5 percent threshold. They are projected to rebound to 17.5 percent of GDP in fiscal year 2024 but fall back to 17.1 percent of GDP in 2025. At the time of the last update, the Review Committee found that revenues would remain above the 17.5 percent threshold throughout the ten-year budget period and decided to continue discounting Factor 9, in accordance with the rules governing the Clock. Given that revenues fell as a share of GDP in 2023 and are projected to fall as a percentage of GDP in 2025, the Review Committee has opted to discontinue discounting Factor 9. On this basis, Factor 9 now buys one minute from midnight.

Factor #10: Does the real rate of U.S. economic growth, as measured in GDP, meet or exceed 3 percent annually?

The data bases for Factor 10 are found at: 1) Bureau of Economic Analysis (BEA), Department of Commerce, here, Table 1 under “Tables Only,” under the heading “Table 5. Gross Domestic Product: Annual Percentage Change” here (historical data); 2) Congressional Budget Office, “The Budget and Economic Outlook: 2024 to 2034,” February 2024, p. 45, here.

Following volatile levels of economic growth in the U.S. during and immediately following the pandemic, the rate of real growth, as measured in gross domestic product (GDP) adjusted for inflation, was unexpectedly strong in calendar year 2023. This rate was 3.1 percent, which exceeds the 3 percent threshold. This means that Factor 10 now buys one minute from midnight, where it bought zero minutes from midnight at the time of the previous update in April 2023. However, the Congressional Budget Office is projecting that the real rate of growth will fall back to just 1.5 percent in calendar 2024 and remain well below the threshold during the entire budget period. If this projection holds, Factor 10 will return to buying zero minutes from midnight before the current calendar year ends.

Factor #11: Has Congress enacted a law prohibiting the Treasury from resorting to “extraordinary measures” in the future?

This is a purely qualitative factor. Therefore, there are neither databases, nor formulas, nor graphs associated with Factor 11. It adjusts the minute hand on the Debt Default Clock according to the legislative actions, or the lack thereof, taken by Congress in the applicable legislative period. Specifically, if either house of Congress has passed such a bill during the congressional session in operation at the time of a review, it will buy one minute away from midnight. If such a law is enacted and remains on the books at the time of the applicable review by the Review Committee, it will buy two minutes from midnight. Current law permits the Treasury to undertake extraordinary measures. In terms of justifying this Factor, it is important to understand that the Review Committee views these measures as “soft” faults by the definition of default under the Debt Default Clock. This definition is a failure by the Treasury to make timely payments on a debt obligation. Extraordinary measures defer debt payments the Treasury owes to certain intra-governmental accounts. Further, the Review Committee sees these as precedents for expanding such measures to apply to certain categories of debt held by the public. Therefore, the Treasury is on the path, once again, to setting bad precedents for what may be called “hard” defaults.

In early 2023, prior to the enactment of the Fiscal Responsibility Act of 2023 (Public Law 118-5), the Treasury actively applied extraordinary measures. The Treasury ceased the application of these extraordinary measures on June 3, 2023, because Public Law 118-5 suspended the debt ceiling law. As described under Factor 2, the ongoing suspension of the debt ceiling law will expire at the beginning of 2025. This means the Treasury is highly likely to begin applying extraordinary measures at that time unless Congress has enacted a new law prohibiting their use. Since neither house of Congress has taken such an action, Factor 11 continues to buy zero minutes from midnight, which is where it stood at the time of the last review.

Factor #12: Is Congress scaling back programmatic “mandatory spending” and eventually phasing it out?

Mandatory programmatic spending, which sets aside net interest payments, does not require the annual appropriation of money by Congress. Effectively, these spending programs are on autopilot. According to CBO, programmatic mandatory spending was more than $3.7 trillion in 2023. This compares with roughly $2.5 trillion in 2018.

Congress needs to rein in these programs by moving them back into the appropriations accounts of the budget to require annual reviews of this spending. By starting to take such steps, Congress should be able to reduce this category of spending dramatically. In fact, it should phase it out altogether. Under the Debt Default Clock, if Congress returns enough of this spending to the appropriations category so that by the end of the ten-year budget period the mandatory category is less than what it was in 2018, it will will buy one minute away from midnight. If the mandatory category is projected to be phased out altogether by the end of the budget period, it will buy two minutes from midnight. Therefore, Factor #12 continues to buy no minutes from midnight. This is where it stood at the time of the last review in April 2023.

The data bases for Factor #12 are found at: Congressional Budget Office, “The Budget and Economic Outlook: 2024 to 2034,” February 2024, p. 10, here; Congressional Budget Office, “Historical Budget Data, Data on revenues, outlays, and the deficit or surplus from 1962 through the most recent year completed” February 2024, here.

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