WASHINGTON -- The Congressional Budget Office (CBO) today released new projections confirming that federal deficits and the accumulated debt remain on an unsustainable path -- a problem that The Concord Coalition urges the new administration and Congress to address as quickly as possible.
“President Trump did not mention the nation’s growing debt burden in his inaugural address or give any indication that fiscal responsibility will be a top priority for his administration,” said Robert L. Bixby, Concord’s executive director. “The new CBO report, however, is an important reminder that the government is already borrowing heavily just to pay its current bills and is on course to borrow at even higher levels in the near future.”
Bixby added: “Large new proposals for spending increases and tax cuts could make the situation worse. Starting on a plan to bring the projected debt down to a sustainable level should be a very high priority for the president and Congress.”
As the economy recovered from the Great Recession, federal deficits fell for several years -- creating widespread complacency about the nation’s fiscal challenges. But last year the deficit grew relative to the economy, and it is expected to soon begin rising again.
The CBO’s annual Budget and Economic Outlook projects that the deficit for the current fiscal year will total $559 billion (2.9 percent of GDP). This is slightly less than last year’s deficit, but that is largely the result of the timing of certain payments; without that technical issue, this year’s deficit would have been slightly higher in dollar terms.
The CBO projects that annual deficits will rise to $1.4 trillion (5 percent of GDP) by 2027 under current law. The projected deficits would add a total of $9.4 trillion to the debt over the coming decade.
Federal debt held by the public is already high by historical standards relative to the size of the economy. The CBO report projects it rising from about 77 percent of GDP this year to 89 percent at the end of 2027.
After that, CBO warns, the debt would continue rising. In 30 years, it would be nearly twice as high relative to GDP as it is this year, and at the highest level ever recorded.
These projections are based on current law, which means they do not take into account new spending programs and tax cuts that Trump, congressional leaders and others in Washington have been discussing. If some of these new proposals are enacted without plans to pay for them, the coming deficits would of course be even higher than today’s projections.
“The CBO’s new projections show that Washington must focus not just on individual short-range decisions but on broad, long-term reforms in the federal budget to protect our economy and our children’s future,” Bixby said. “The longer these reforms are delayed, the more difficult they will be and the more sacrifices they will require from the American public.”
Social Security, Medicare, Medicaid and interest payments on the debt account for 80 percent of the $2.6 trillion in projected spending growth between 2017 and 2027.
The spending increases will be largely driven by the aging of the population and rising health care costs. These factors lead to faster-than-economic-growth spending over the 10-year period on Social Security (grows by 1.1 percent of GDP), Medicare (1.1 percent of GDP), and Medicaid (0.3 percent). The budget office also projects that the government’s interest costs will rise (by 1.3 percent of GDP) as the result of both higher rates and greater amounts of debt.
In addition, the tax code is riddled with special provisions that are essentially spending programs in disguise, draining federal revenues to benefit some individuals and businesses over everyone else. The CBO estimates these tax expenditures total over 8 percent of GDP in 2017.
“The nation’s financial challenges are so large that elected officials need to carefully scrutinize the entire federal budget, but the numbers make clear that tax and entitlement reform are essential,” Bixby said.
Media Contact: Steve Winn, [email protected] (703) 254-7828.
The Concord Coalition is a nonpartisan, grassroots organization dedicated to fiscal responsibility. Since 1992, Concord has worked to educate the public about the causes and consequences of the federal deficit and debt, and to develop realistic solutions for sustainable budgets. For more fiscal news and analysis, visit concordcoalition.org and follow us on Twitter: @ConcordC