WASHINGTON — The Concord Coalition said today that new 30-year projections by the Congressional Budget Office (CBO) demonstrate why Congress and the president should ensure that necessary near-term steps to control the COVID-19 virus and support the economy should not make the already daunting long-term outlook even worse.
Concord issued the following statement from Executive Director Robert L. Bixby:
Long-term problems don’t get much attention in the face of an immediate crisis, but today’s 30-year outlook by the CBO shows why troubling trends for the budget and the economy will need swift attention once the COVID-19 pandemic is behind us.
These trends are the result of a permanently growing mismatch between spending commitments and projected revenues that put the budget on an unsustainable track. They pre-existed the massive amount of debt taken on to fight the pandemic and they will only get worse if they are ignored. Debt is now projected to double as a share of the economy by 2051 — from a level already approaching historic heights.
The root causes are easy to discern: population aging, rising health care costs, slowing workforce growth, and rising interest payments on the nation’s debt.
The share of the population aged 65 and older will grow from 17 percent this year to 22 percent in 2051. This translates into higher spending for Social Security, Medicare, and Medicaid. By 2051, CBO projects that spending for these programs would grow from 11 percent of the gross domestic product (GDP) to 15.7 percent under current law. As a share of non-interest federal spending, they would grow from 44 percent this year to 68 percent in 2051.
Spending on the federal government’s major health care programs is projected to continue growing faster than the economy. This adds to the cost growth caused by the increase in beneficiaries. By 2051, CBO projects that spending on the major health care programs would grow from 5.9 percent of the economy to 10.9 percent under current law. One-third of that comes from population aging, while the remaining two-thirds comes from rising costs per beneficiary.
Labor force growth, a key component of economic growth, is projected to slow by about two-thirds from the recent historical average as the population ages. Policymakers cannot count on economic growth alone to close the expanding budget gap.
Low interest rates on government debt slow but do not halt the unsustainable path we’re on. The constant accumulation of massive new debt on an annual basis, long after it may be needed as a COVID-19 response, would eventually overwhelm the effect of low interest rates. In CBO’s projections, interest costs rise from a modest 1.4 percent of GDP this year to a staggering 8.6 percent of GDP in 2051, an amount close to half of all projected revenues in that year. CBO notes that net interest “accounts for most of the growth in total deficits on the last two decades of the projection” and would surpass spending for Social Security by 2045.
Ignoring our long-term structural fiscal and economic problems will not make them go away. The longer we wait to act, the more difficult the solutions will be — and the greater the risks will be to the nation’s future. As the debate turns from the current crisis to the post-pandemic economy, policymakers should craft an agenda that is both pro-growth and fiscally responsible. An agenda premised on ever-low interest rates and ever-rising debt is not a solid foundation for a sustainable budget or a growing economy.
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