The Congressional Budget Office (CBO) released new projections Monday that show the federal deficit dropping to 2.8 percent of GDP in this fiscal year, nearly a third less than last year’s shortfall. Citizens and elected officials should remember, however, that deficits are still on track to rise sharply after next year and continue on an unsustainable path.
In a related release, the CBO and the Joint Committee on Taxation (JCT) staff also updated their estimates on Affordable Care Act (ACA) provisions on health insurance coverage. Current projections for these provisions show a net cost of nearly $1.383 trillion for the coming decade, $104 billion less than estimated in February.
Federal deficits, CBO says, would rise under current law to 4 percent of the economy over the next decade. These deficits, totaling $7.6 trillion, would push the federal debt up to 78 percent of the economy by 2024 -- twice the average for the past four decades.
As the budget office notes, such high and rising debt could mean higher federal interest payments, lower wages and economic productivity, greater risk of a fiscal crisis, and less flexibility for the nation to meet unexpected challenges.
Despite the cost of insurance coverage provisions, other parts of the health care law will reduce deficits. As a result, CBO and the tax committee staff have previously estimated that the ACA’s overall effect would be to lower deficits. But CBO says it can no longer produce a cost estimate to that effect because isolating the effects of many different provisions four years after the law was enacted is not possible.