So for perspective, after the financial crisis, the deficit got to about 12% of GDP, in other words, ridiculous levels. Oh sure, you had to pay for TARP, the stimulus, countercyclical fiscal spending, emergency stuff, but as is usually the case, a lot of that “emergency” spending becomes institutionalized.
The budget deficit is much smaller today, about 3% of GDP (but projected to rise), but we mostly got there through enhanced revenue collection. The government has gotten very good at collecting taxes (as you already know).
But if you look at the forecasts from the Congressional Budget Office (CBO), the budget deficit is projected to rise, and rise, and rise… until, about 10 years from now, it is back out to crisis levels. This happens because interest rates are projected to rise (at least by the CBO) and “mandatory” spending (code for entitlements) is projected to increase. This is the Social Security bomb that everyone likes to talk about. Plus Obamacare, which isn’t exactly free.
This is all before any programs that any future president might dream up, including Bernie Sanders’ Medicare for all (and free college).
Once again, I go back to what I said before:
Not one candidate (Democrat or Republican) is campaigning on a platform of deficit reduction.
So
So right now, the debt-to-GDP ratio is about 102%. Above 100% is generally considered to be the danger zone. The US can easily manage it without interest rates rising, because we are in possession of the reserve currency.
For now.
One of the things I teach in my class is how a bond auction works because that is pretty powerful knowledge. I am not sure Jack Lew knows how it works. For sure, Bernie Sanders does not know how it works. If you have ever traded a bond auction, for sure you understand how supply and demand for government debt influences interest rates. It is super easy: more bonds issued, more supply, lower prices, higher interest rates.