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CBO projections of debt, normalized by GDP and potential GDP, from before December passage/signing (CBO June 2017) and after (April 2018).

Figure 1: Federal debt held by public CBO projection as of Jun 2017 (blue squares), and as of April 2018 (red squares), divided by nominal GDP. Sources: CBO, Budget and Economic Outlook, June 2017, April 2018, BEA, and author’s calculations.

Here is debt, normalized by CBO estimated potential GDP.

Figure 2: Federal debt held by public CBO projection as of Jun 2017 (blue squares), and as of April 2018 (red squares), divided by nominal potential GDP. Sources: CBO, Budget and Economic Outlook, June 2017, April 2018, July 2023 (for potential GDP), and author’s calculations.

While one cannot impute the entire change in the debt-to-GDP ratios to the TCJA, we do know that using non-fanciful estimates, TCJA was going to blow a hole in government finances (see e.g. here). What were the deficit hawks of today saying back then (at a time when the output gap was arguably pretty small)? (Aside from CRFB, who were against TCJA.)

 

 

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