About the Debt Default Clock

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

The Default Clock Committee,
March 15, 2021

Beyond the troubling debt-ceiling standoffs we witness every few years, looms a far more dire threat: a true U.S. government default, which economists warn could 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. On September 10, 2018, the Review Committee announced significant revisions in the design of the Clock from its original version to make it more accurate. This announcement is found at: https://debtdefaultclock.us/wp-content/uploads/press-release-02a.pdf. The Review Committee, continuing to use this revised Clock design, completed its review prior to the one found here in October of 2020.

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. “Insolvency” is defined as the point beyond which default becomes a virtual certainty.

Since 2013, Congress has gotten into the habit of temporarily 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. In fact, the federal government is operating under such a suspension today. This accommodated Congress’ actions to increase dramatically spending in fiscal year 2020, which ended on September 30, 2020. This practice is dangerous. Worse, Congress may decide to repeal outright the debt ceiling law, claiming that the future health and economic effects of the pandemic are unpredictable and the 2020 increases in spending need to be continued indefinitely. Repealing the debt ceiling does not repeal 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! Congress seems to be telling itself: “If I just increase the credit limit on my credit card, I will never have to pay it off!”

This irresponsible view, unfortunately, is being reinforce by the Federal Reserve’s actions in response to the pandemic. The Federal Reserve has 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 has also expanded dramatically its holdings of Treasury securities.

Combined, these steps have served to delay the onset of federal insolvency and ultimately default by lessening the government’s interest costs, despite the explosion in spending, deficits and debt, and relieve what would otherwise be enormous pressure on the Treasury securities market. The structure of the Clock accounts for both the near-term and long-term effects of Federal Reserve’s actions on the fiscal position of the federal government. As necessary as the Federal Reserve’s actions are in the near term, the Clock shows that their stabilizing effects on the federal government’s fiscal position reverse with the passing of time over the ten-year budget period. The federal government’s spending decisions in response to the pandemic have made its dismal fiscal position prior to its onset much more precarious, even though the Clock shows little deterioration from what it showed in both its February and October 2020 updates. Specifically, the dramatic increases in spending have been offset by lower interest costs. Another thing to keep mind is that most of the factors that were already buying zero minutes away from midnight at the time of the October review are now dramatically worse. It is unclear how the federal government will be able to obtain even one minute away from midnight each for most of these factors at any time in the future.

The debt ceiling is the federal government’s most important fiscal barometer, and the Review Committee hopes the Debt Default Clock will help the public to read the immediacy of the danger by showing it in a clear and simple way how close the federal government is to default. 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 any point in time. 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 dramatic changes having taken place since the February 2020 update, which are continuing, 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?
  13. While economists and financial experts will readily appreciate the relevance of each of these factors, we realize that the lay reader may find them confusing. For everyone’s benefit, the following is a detailed, plain-English explanation of each factor, together with all of its underlying data and assumptions.

Warning: Default Ahead

The United States will reach insolvency—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 right now, the federal government is currently failing in seven of them. These are Factors 1, 2, 3, 8, 10, 11, and 12. However, three factors (Factors 4, 6 and 9) buy one minute from midnight each, based on the projections. Therefore, as of today, the Debt Default Clock now stands at just three minutes from midnight. This is where it stood at the time of the last review in October of 2020. It is essential to point out, however, that the federal government’s fiscal position was continuing to weaken dramatically in certain areas during the intervening months. Specifically, six factors that provided zero minutes from midnight each, both in October and now, show steep declines. While these declines cannot move the Clock’s minute hand, they will make the road back to providing even just one minute away from midnight for each practically impossible.

The design of the Clock also permits the Review Committee to discount up to two factors at any one time. On this basis, the Committee has decided to discount Factors 5 and 7. The first of these measures the size of interest costs relative to the amount of money raised by the federal government by the issuance of new debt, but on a sustained basis. The very-large net increase in the federal debt in fiscal 2020, along with the Federal Reserve’s actions to reduce interest costs, makes the current circumstance inconsistent with the “sustained basis” standard in Factor 5. Regarding Factor 7, the level of foreign-held debt, as it did in the previous review, sees foreign-held debt as stabilizing in dollar terms and declining relative to the total amount of debt held by the public. These discounting steps are in accordance with the design of the Clock.

As indicated earlier, Factors 4, 6, and 9 continue to buy one minute from midnight each. At the time of the October review, Factor 4 bought one minute from midnight because gross federal interest costs were projected to be below 15 percent of revenues in the early and middle years of the ten-year budget period. This is the same as the present projection, but gross interest costs are projected to rise above 15 percent of revenues before the end of the budget period. In October, Factor 6 bought one minute from midnight because the debt held by the public did not exceed 80 percent of the gross debt until later in the budget period. This remains the case today, with the current projection showing fiscal 2023 is the year when the debt held by the public will exceed 80 percent of the gross debt. When this happens, Factor 6 will no longer buy one minute from midnight. Factor 9 on the level of revenues relative to GDP, shows projections that meet 17.5 percent of GDP in fiscal 2023, but fluctuate below and above this threshold in the course of the budget period. While this is a modest improvement from the October projection, it remains the case that Factor 9 buys one minute from midnight. On the other hand, it is also the case that Factor 9 is close to meeting the requirement to earn two minutes from midnight.

On the basis of the current projections for these three factors, the Review Committee is able to translate the conceptual minutes to midnight into a real-world timeline. This timeline, however, will necessarily be somewhat more speculative than the one put out in October because of the dramatic impact the covid-19 response has had on the federal government’s fiscal posture. Also, it remains essential to keep in mind that this timeline is derived from the Debt Default Clock design. This means that improving and deteriorating conditions in any of the applicable factors will change with circumstances and result in changes in the timeline, both positive and negative. The current projection for Factor 4 shows that it is at the wrong side of its threshold in 2020, but is on the right side until it again goes negative in 2030. This is about the same as it was at the time of the October review. If Factor 4 remains strong, it is likely the Review Committee will discount it in a future update. Factor 6 is now projected to move to the wrong side of its threshold in 2023. This compares with 2022 at the time of the February update. Regarding Factor 9, which also currently is buying one minute from midnight, it could pass to the healthy side of its threshold in 2023 and could stay above it thereafter. If the Review Committee decides to discount Factor 9, along with maintaining the discounting of Factor 7, the timeline becomes dependent on what happens with the two factors tied to federal interest costs, as Factor 6 buys no minutes from midnight at some point in 2023. These are Factors 4 and 5. Factor 4 currently buys one minute from midnight because it is projected to be on the healthy side of its threshold for most of the budget period. The line over the budget period is u-shaped, with it being on the wrong side of the threshold at both the beginning and the end of period. The improvement in the status of Factor 4 is projected to end in 2026. The question is whether this u-shaped line will become shallower in future updates because interest cost declines relative to revenues end earlier than currently projected. In the view of the Review Committee, such a squeeze is more likely than not to result in Factor 4 crossing over to wrong side of its threshold in 2026. At that point, Factor 4 will no longer buy one midnight from midnight.

Factor 5 is currently discounted because of the dramatic increase in the federal government’s assumption of net new debt and a significant decline in interest costs in 2020 compared to what was projected in earlier update of the Clock, which was in February of 2020. However, this currently projected change appears to be of limited duration. Accordingly, there is a good chance the Review Committee will decide in the future to reverse its current decision to discount Factor 5. If so, it is more likely than not that Factor 5 will not qualify to buy a minute from midnight around 2026. An essential part of this calculation is the Factor 5 is the most volatile one among all twelve of the factors in the Clock’s design.

Taken together, these outcomes for Factors 4, 5, 6 and 9 would make the time the federal government faces insolvency to be around 2026. This was same year as projected in the October update. Thus, the current circumstances make it the judgment of the Review Committee that while the Debt Default Clock remains at three minutes from midnight at this time, and still projects 2026 as the year of the onset on circumstance of federal fiscal crisis.

If the federal government remains on its currently projected fiscal trajectory, the more politically difficult and economically painful its choices will become as time passes.

The Default Clock is ticking.

Learn More

The Debt Default Clock Review Committee responds to the new debt ceiling and the use of “extraordinary measures.”

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 2012. In 2020, they exploded to more than 31 percent of GDP because of the spending laws enacted so far in response to the coronavirus pandemic. This compares with federal outlays constituting 21 percent of GDP in 2019. While the same projection shows that outlays as a share of GDP will fall back from the 2020 level in the years that follow, this is highly uncertain because of possible, if not likely, spending laws related to the that are not yet enacted. It is entirely possible that the previously enacted spending measures will be converted into permanent mandatory spending. Even absent such a conversion, it is a virtual certainty that federal outlays will stay well above the 17.5 percent threshold for the remainder of the ten-year budget period unless Congress and President Biden reverse course. This current projection shows that in the final year of the budget period (2031) outlays will be at 23.2 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,” February 2021, here; and 2) Congressional Budget Office, “The Budget and Economic Outlook: 2021 to 2031” February 2021, p. 2, 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?

Once again, there is no dollar-denominated debt ceiling in place because the debt ceiling law has been suspended. This was brought about by the enactment of The Bipartisan Budget Act of 2019 (Public Law 116-37). This Act was signed into law on August 2, 2019. As a result, the debt ceiling is suspended through July 31, 2021. Thus, the opportunity to restore a dollar-denominated debt ceiling will present itself during the summer of 2021. Given today’s circumstance, however, Factor #2 buys zero minutes from midnight. This is where it stood as of the prior review. Given the suspension, there are no data bases and graph associated with Factor #2 at this point. They will appear when a dollar-denominated debt ceiling is put back into place. If President Biden and Congress reverse the current course and set a new dollar-denominated ceiling, the Review Committee plans to issue a statement at that time.

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 continue to exceed 70 percent and 100 percent of GDP respectively. In fact, the debt problem has been made much worse by the additional spending that has taken place in response to the coronavirus pandemic. The debt held by the public is projected was at 100.1 percent of GDP at the end of fiscal 2020 and by the end of the budget period (2031) is to rise to 107.2 percent of GDP. The gross debt was at 128.1 percent of GDP at the end of fiscal 2020 and is to be at 121.3 percent of GDP at the end of fiscal 2031. 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 they actually fall below their thresholds. The data bases for Factor #3, whether provided directly or used to calculate the outcome, are as follows: 1) Office of Management and Budget, “Historical Tables,” Table 7.1, February 2020, here; 2) Congressional Budget Office, “The Budget and Economic Outlook: 2021 to 2031,” February 2021, pp. 3, here; 3) Congressional Budget Office, “Budget and Economic Data,” under the subheading “10-Year Economic Projections,” February 2021, here.

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

At the time of the last Clock review in October 2020, the level of gross federal interest costs relative to revenues were projected to be a bit over 15 percent in fiscal 2020. This projection is now confirmed. The last review also projected gross interest costs to fall below this threshold in 2021 and remain there until late in the budget period. Thus, Factor #4 bought one minute from midnight at that time. The same circumstance pertains to this Factor as of the time of this review. This is despite the large scale increases in federal spending and the debt described earlier for Factors #1 and #3. Accordingly, Factor #4 continues to buy one minute from midnight on the Clock. The counterintuitive relationship between the rising debt and lower interest costs is the result of the Federal Reserve’s aggressive actions to reduce interest rates and expand its holdings of Treasury securities in response to the coronavirus, which has a corresponding impact on lowering the average interest rate for the Treasury securities used to finance the debt and gross interest costs incurred by the federal government. Specifically, gross interest costs are now projected to decline relative to revenues over the next several years, but then exceed this threshold later in the budget period. It is necessary, however, provide a caveat to this projection. Gross federal interest costs could rebound quite quickly if the Federal Reserve is forced to curtail its current actions, perhaps by needing to counter rising inflation rates. The data bases for this Factor are as follows: 1) Department of the Treasury, “Interest Expense on the Debt Outstanding,” at here (accessed February 24, 2021); 2) Congressional Budget Office, “The Budget and Economic Outlook: 2021 to 2031,” February 2021, p. 2, at 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,” February 2021, at here; and 4) and under the heading “Spending Projections by Budget Account” (specifically Line 1765, “Interest on Treasury Debt Securities (gross)”), February 2021, at 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 previous iteration of the Default Clock (October 2020) showed that the combination of the assumption of a large of amount new debt resulting from the increase in spending in response to the coronavirus and lower gross interest costs resulting from the action by the Federal Reserve to lower interest rates and expand its holdings of Treasury securities had caused a dramatic change in the projection of the ratio for Factor #5 from what described in February 2020. The new projection is roughly consistent the October iteration. Since this still appears to be an isolated event, and therefore not consistent with the “sustained basis” standard for Factor #5, the Review Committee has decided to discount Factor #5 again at this time. This action is consistent with the Clock’s design, which permits the Committee to discount up to two factors. It is appropriate to note, however, that even with this discounted projection there are early indications from the later years of a sustained pattern of increasing federal interest payments relative to the money to be brought into the federal government by the issuance of new debt. Thus, there is a distinct possibility that the Review Committee will no longer discount Factor #5 in its next review. In part, this is because Factor #5 is the most volatile of all the factors used for the Clock. The data bases for this factor are: 1) Office of Management and Budget, “Historical Tables,” Table 7.1, February 2020, here; 2) Congressional Budget Office, “An Update to the Budget Outlook: 2020 to 2030” September 2020, p. 8, here; 3) Department of the Treasury, “Interest Expense on the Debt Outstanding,” here; and 4) Congressional Budget Office, “Budget and Economic Data,” under the heading “Spending Projections by Budget Account” (specifically Line 1784, “Interest on Treasury Debt Securities (gross)”), September 2020, 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 starting in 2023. As with the previous update, Factor #6 buys one minute from midnight. If the projection proves accurate, Factor #6 will cease to buy one minute from midnight in just two years. This the new projection shows that the situation for Factor #6 is continuing to deteriorate rapidly. The data base for this factor is found at: Congressional Budget Office, “The Budget and Economic Outlook: 2021 to 2031,” February 2021, p. 3, found here.

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

As with the prior update of the Debt Default Clock, which took place in October 2020, this update shows that the dollar value of the debt held by the public owned by foreigners is projected to remain below 50 percent of all the debt held by the public throughout the ten-year budget period. This is due to the fact that in recent years the rate of growth in the dollar level of foreign-held federal debt, which in general continues to grow, is moving in the direction of making up a smaller portion of all debt held by the public. By way of reference, the dollar value of foreign-held federal securities during 2019 and 2020 combined went up by a bit more than 13 percent. During this same two-year period the dollar value of all federal securities held by the public went up by 25 percent. 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 debt exposure. The data bases for this Factor are: Department of the Treasury, “Ownership of Federal Securities,” here (accessed February 25, 2021); 2) “Congressional Budget Office, “The Budget and Economic Outlook: 2021 to 2031,” February 2021, p. 3, 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, in Billions of Dollars,” February 2021, 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 Excel spreadsheets, are available at https://www.treasurydirect.gov/govt/reports/pd/mspd/mspd.htm (accessed February 28, 2021) 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 in excess of ten years. For 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 September 30, 2020, all the STMFROs constituted 75.4 percent of all the marketable Treasury debt outstanding, as measured in dollars. This is a bit higher than their percent of all marketable Treasury debt as of September 30, 2018. 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. Specifically, Treasury interest costs would rise very quickly with higher inflation and interest rates because of the current structure of the debt. 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. Thus, Factor #8 continues to buy zero minutes from midnight and is moving in the wrong direction.

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 fiscal 2020, the data reveal a modest decline in the bid-to-cover ratios in each of these securities over the last four or five years. At this point, the Review Committee does not find this modest decline alarming, but it continues to come with a caveat because of the federal government’s reaction to the covid-19 pandemic. Between March 2020 and August 2020, the Federal Reserve, in response to the pandemic, increased its holdings of Treasury securities by almost $1.8 trillion. Further, the Federal Reserve has publicly committed itself to expanding its holdings of these types of securities by $80 billion per month for the foreseeable future. This action by the Federal Reserve makes it unclear what these bid-to-cover ratios would have been had the Federal Reserve not expanded its holdings of Treasury securities in this way. 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 this Factor are found at: 1) Congressional Budget Office, “The Budget and Economic Outlook: 2021 to 2031,” February 2021, p. 2, here; 2) Congressional Budget Office, “Historical Budget Data/Revenues, Outlays, Deficits, Surpluses and Debt Held by the Public Since 1962,” February 2021, here. Federal revenues were at 16.3 percent of GDP in 2020. CBO projects they will fall to 16 percent of GDP in 2021. In 2023, revenues are projected to reach the 17.5 percent of GDP threshold and fluctuate above and below the threshold during the remaining years of the ten-year budget period. Accordingly, the Review Committee finds that Factor #9 continues to buy one minute from midnight on the Clock. This remains the same as it found in its last update of the Clock. It is important to note, however, the differing effects of the response to the pandemic on federal outlays and revenues in 2020. The contracting economy in 2020 caused federal revenues to fall by a bit more than 1.2 percent in 2020 compared to 2019. The stimulus spending packages enacted in 2020 caused federal outlays to rise by more than 47 percent compared to 2019. When projected federal revenues as percentage of GDP are viewed over the entirety of the ten-year budget period, they are not far from meeting the 17.5 percent threshold throughout that period. If that happens, Factor #9 will buy two minutes from midnight on the Clock. This would signify that revenue shortfalls will no longer be a significant contributing factor to the onset of fiscal crisis.

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 “Gross Domestic Product” here (historical data); 2) Congressional Budget Office, “The Budget and Economic Outlook: 2021 to 2031,” February 2021, p. 12, here.

The negative impact of the coronavirus pandemic on U.S. real economic growth was very large in calendar 2020. CBO assesses it shrank by 3.5 percent in real terms. It is now projecting a rebound in 2021 of 4.6 percent, but this is from the low level of economic activity in 2020. Beyond 2021, CBO projects that the annual real rate of economic growth will remain at levels below 3 percent. On this basis, the Review Committee decided to continue with its October 2020 assessment that Factor #10 buys no minutes from midnight.

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 data bases, nor formulas, nor graphs associated with Factor #11. It adjusts the minute hand on the Debt Default Clock on the basis of 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. Since current law permits the Treasury to undertake extraordinary measures and Congress has taken no action to prohibit the use of them, Factor #11 continues to buy no minutes from midnight.

On March 1, 2019, a previous law suspending the statutory debt ceiling expired. The restored the statutory debt ceiling (“the debt subject to limit”) was at slightly less than $22 trillion. As a result, the Department of the Treasury used extraordinary measures from that time through early August of that year. In early August, the suspension of the statutory debt ceiling was restored by the enactment of the Bipartisan Budget Act of 2019 (Public Law 116-37). In the view of the Review Committee, extraordinary measures are “soft” defaults by the definition of default under the Debt Default Clock and sees these as precedents for expanding such measures to apply to certain categories of debt held by the public. The Treasury, therefore, not only retains the authority to use extraordinary measures, it continued to set these bad precedents for much of 2019.

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 almost $4.7 trillion in 2020. This compares with roughly $2.7 trillion in 2019. The large jump is due to the mandatory spending in the various pandemic response bills enacted to date. The same analysis indicates this number will fall back to a bit less than $3.8 trillion in 2021, but this is dependent on Congress not enacting additional spending laws in this area or making all the coronavirus spending programs permanent. In fact, Congress is very likely to enact additional spending measures in response to the pandemic. As it stands, CBO projects this spending to grow to almost $5 trillion in 2031.

Congress needs to rein in these programs by moving them back into the appropriated accounts of the budget in order to review this spending on an annual basis. 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 appropriated 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.

The data bases for Factor #12 are found at: Congressional Budget Office, “The Budget and Economic Outlook: 2021 to 2031,” February 2021, p. 2, 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 2021, here.

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