WASHINGTON -- With Congress facing important budgetary deadlines in the next few weeks, The Concord Coalition said today that the new Budget and Economic Outlook by the Congressional Budget Office (CBO) underscores that much more needs to be done to bring about a sustainable fiscal policy.
“The trends reflected in the CBO’s report make clear that Congress and the President must put policies in place that look well beyond the government’s traditional 10-year budget window. Our main emphasis should be long-term stabilization of the growth rate of the debt rather than the specific level at which it stands by the end of any particular 10-year budget window,” Bixby said.
“While we do need to rein in the projected deficits over the next decade, the aging of the population means medical costs and the big entitlement programs will be putting more and more pressure on the federal budget for decades to come,” he added. “Further delays in serious long-term planning for this will simply make the political job harder -- and require even more public sacrifice down the road.”
As Concord and other bipartisan groups have repeatedly pointed out, such fundamental reforms can be phased in so that they do not jeopardize the economy in the short run. But immediate economic worries should not be used as an excuse for procrastination on long-term reforms.
The CBO’s report shows that under current law, cumulative deficits over the next decade would total $6.96 trillion. By 2023, debt held by the public would reach $19.9 trillion -- 77 percent of GDP.
But if Congress -- as it has often done in the past -- decides to change current law to extend certain policies, future deficits could be significantly larger. Under some alternative assumptions, the CBO projects an additional $2.5 trillion in deficits, with debt held by the public growing to nearly 90 percent of GDP by 2023.
Some notable statistics from the CBO report:
- Under the CBO baseline, interest costs would more than double as a share of the economy. Under the Alternative Scenario, interest costs would rise to nearly $1 trillion in 2023 alone (up from $857 billion in the baseline). This would be more than projected spending on non-defense discretionary spending, or defense spending, or any other federal program other than Medicare and Social Security.
- In CBO’s baseline projections, mandatory spending would increase from 13.2 percent of GDP in 2014 to 14.1 percent in 2023. This increase is driven entirely by Medicare, Medicaid and Social Security (together accounting for over half the total federal budget). The remaining mandatory spending programs are projected to shrink from 3.1 percent of GDP to 2.4 percent -- representing the unwinding of automatic stabilizers as the economy recovers.
- The number of Social Security recipients is expected to grow by 40 percent between 2012 and 2023.
- Medicare will absorb approximately 18 million new beneficiaries during the same time period -- growth that is more responsible than health care inflation for increased programmatic spending.
- Under CBO’s baseline, which assumes that the “automatic” cuts required by the Budget Control Act will take effect, discretionary spending would decrease from 7.6 percent of GDP in 2013 to 5.5 percent by 2023 -- the lowest level in the last 50 years.