The Congressional Budget Office released worrisome long-term projections on Tuesday that deserve to be a central focus for the 2016 presidential candidates.
“Today’s Long-Term Budget Outlook should be considered an essential campaign primer for the presidential candidates in both parties,” says Concord Coalition Executive Director Robert L. Bixby. “It shows why the next president, working with Congress, must move quickly and effectively to put the country on a more sustainable course.”
The federal debt held by the public is already quite high by historical standards at 74 percent of GDP. The budget office projects that if current laws were to remain generally unchanged, by 2040 the debt could reach or even exceed 103 percent of GDP — harming the economy while still continuing on an upward path.
The CBO issued sobering guidance about the magnitude of the changes that policymakers need to contemplate. Just to achieve the current debt-to-GDP ratio in 2040 would require a $210 billion cut in spending or an equivalent increase in revenues — about $1,450 per person — every year for 25 years from the levels assumed in current projections.
To reduce the debt to its 50-year average (38 percent of GDP) would require a $480 billion cut in spending or increase in taxes every year.
Other key projections for 2040 under current laws:
With an aging population, federal spending on Social Security and major health programs would rise to 14.2 percent of GDP, more than twice the average for the past half-century.
Federal spending on everything other than Social Security, health care and interest would drop to 6.9 percent of GDP, far below the 11.6 percent average for the past 50 years.