WASHINGTON -- The Congressional Budget Office (CBO) today released projections that show sharp increases in the federal deficits and debt over the next decade and beyond. Robert L. Bixby, executive director of The Concord Coalition, issued the following statement:
This is the most alarming budget outlook in our nation’s history. “Deficits as far as the eye can see” used to be considered a problem, but we have now reached a remarkable new milestone of fiscal irresponsibility: trillion-dollar deficits as far as the eye can see. What once would have been considered unthinkable is now projected to be routine. More noteworthy than the sheer magnitude of the projected deficits is the extent to which Congress and President Trump have spent the past year making them worse, approving large deficit-financed tax cuts in December and deficit-financed spending increases last month. No serious effort was made to offset the lost revenue and spending increases.
The consequences of this fiscal irresponsibility are reflected in the alarming projections released today by the CBO in its annual Budget and Economic Outlook.
Under current law, the budget office projects the federal deficit will rise from $804 billion in this fiscal year to surpass the $1 trillion mark in 2020 and reach nearly $1.53 trillion by 2028. Total deficits over the next decade would total nearly $12.42 trillion.
Federal debt held by the public is already quite high by historical standards. The CBO projects that this debt will rise from 78 percent of GDP this year to 96.2 percent in 2028. On this path the debt would continue to rise indefinitely.
Current tax and spending policies are moving the country toward a vicious cycle of rising interest rates and even higher levels of debt. The CBO projects that by 2028 federal interest costs would exceed $900 billion, nearly triple what they are this year in nominal terms, and roughly double as a percentage of GDP.
Even these numbers likely understate the worsening fiscal outlook. The CBO released an alternative fiscal scenario in its report, taking into account changes that more closely represent current policy trends. Compared to the basic scenario, the alternative projects an additional $2.6 trillion in deficits over the next 10 years.
The CBO’s latest projections are hardly surprising. Economists across the political spectrum and the budget office itself have repeatedly warned of the deteriorating fiscal situation. They also warned that the policies approved by Congress and the president in recent months would dig the government into an even deeper financial hole.
The tax legislation alone increased deficits by $1.3 trillion even after taking into account the increases in economic growth it is projected to spur. Interest on that added debt boosts the deficit by another $582 billion.
When looking at these projections relative to CBO’s last projections in June 2017, deficits will be $1.6 trillion higher over 10 years. Legislative actions have combined to increase deficits over that period by $2.7 trillion -- with tax cuts causing 64 percent of the change, spending increases making up 17 percent of the change, and higher interest costs from those policies adding 19 percent. Updated economic projections and technical changes to estimates offset the legislated deficit increases by $1.1 trillion.
Such high and rapidly growing levels of government debt over the next few years would pose a serious threat to the nation’s economy and position of global leadership. The eventual results could include lower living standards, a weaker military and deep cuts in critical government services and investments. Perhaps worst of all, we would be selfishly burdening our children and grandchildren with massive government debt.
The longer we wait, the more painful the solutions will be. The CBO’s new projections are a warning that elected officials in Washington must pursue far more responsible fiscal policies than in the past. If they fail to do so, American voters should be on the lookout for replacements who will.