WASHINGTON -- The Concord Coalition said today that new Congressional Budget Office (CBO) projections show why the Congress and President Obama must try to move forward on fiscal reforms wherever possible in the coming year.
The CBO’s Budget and Economic Outlook, released this afternoon, estimates that under current law federal deficits -- despite dropping in recent years -- will begin rising again after 2016, reaching $1.1 trillion in 2025. This would add a total of $7.6 trillion or more to the nation’s debt over the coming decade.
The new report deserves particular attention from 2016 presidential hopefuls as they develop their campaign proposals. Last week Concord and the Campaign to Fix the Debt announced “First Budget,” a joint effort to encourage the presidential candidates to offer realistic plans for broad budget reforms.
“The relative stability shown in the numbers over the next few years provides an opportunity to enact policies that move the budget toward a more sustainable long-term path. Unfortunately, some may take it as a reason to put fiscal policy on the back burner. That would be a misreading of today’s report, which clearly demonstrates steadily rising deficits and debt returning at about the time the next president takes office,” said Robert L. Bixby, Concord’s executive director.
“There have been some positive developments, including the strengthening of the economy, continued low interest rates and slower growth in health care costs,” Bixby added. “What is striking, however, is that despite such positive trends, the budget remains on an unsustainable long-term path. Lawmakers cannot simply sit back and hope for the best. They need to take action.”
The 10-year deficit projection totaling $7.6 trillion is generally based on current laws that Congress might well change. Under more plausible assumptions, deficits could total $9.5 trillion over the next decade.
“The reasons for rising deficit projections for the coming years are no surprise, and cannot be fixed by simply cutting waste, fraud and abuse,” Bixby said. “The population is aging, more older people are eligible for government benefits, health costs will continue to rise, our tax system is an inefficient mess, and interest payments on the federal debt will likely be much higher in the future. Within 10 years, mandatory spending programs and interest on the debt will consume 94 percent of projected revenues. Discretionary spending, including national defense and domestic investments, will be continuously squeezed.”
The budget office says federal debt held by the public, already high by historical standards, will climb from about 74 percent of GDP at the end of this year to nearly 79 percent over the next decade. The annual deficit, which will remain at about 2.5 percent of GDP through 2018, will climb after that and reach 4 percent of GDP by 2025.
The new report focuses on the next 10 years. In its long-term outlook last summer, however, the CBO warned of worsening fiscal conditions over the next 25 years, with the debt held by the public eventually exceeding 100 percent of GDP -- and continuing to rise after that.
The CBO today said its latest projections do not “materially change” that longer-term outlook and added: “Such large and growing federal debt would have serious negative consequences, including increasing federal spending for interest payments; restraining economic growth in the long term; giving policymakers less flexibility to respond to unexpected challenges; and eventually heightening the risk of a fiscal crisis.”
Nor is CBO alone in warning of the need for fiscal reforms. The Social Security and Medicare Trustees, in their 2014 reports, reiterated that changes in those programs are needed sooner rather than later.
In addition, last month former U.S. Senators J. Robert Kerrey and John C. Danforth, working with The Concord Coalition, released an update of the 1994 report from a commission they headed on entitlement and tax reform. They, too, urged prompt action in Washington.
Media Contact: Steve Winn, (703) 254-7828, [email protected]
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