The Concord Coalition issued the following statement today by Executive Director Robert L. Bixby regarding updated economic and budget projections from the Congressional Budget Office:
Despite eye-popping near-term deficit projections, the more significant and troubling aspect of CBO’s updated projections is that even when the budget and the economy begin to recover from the effects of the COVID-19 pandemic, pre-existing spending and tax policies will keep the debt on an unsustainable path.
No plan for putting the budget on a sustainable path will succeed without improved economic growth and that won’t happen until the pandemic is brought under control. In pursuit of that goal, concerns about budget deficits and the national debt have appropriately taken a back seat. They must not, however, be allowed to fade from the nation’s agenda.
As CBO’s new baseline shows, even with substantially lower interest cost projections due to persistently low interest rates, and with the unlikely assumption that Congress will allow many tax cuts enacted in 2017 to expire in 2025, deficits will exceed five percent of GDP by 2030 (up from 4.6 percent in 2019 before the pandemic hit) and the debt will continue its upward trend relative to the size of the economy.
It may be many months before policymakers can turn their attention from fighting the pandemic to growing the economy but it is not too soon to begin thinking about what should be done when that time arrives.
The overriding concern of federal lawmakers should be to ensure that today’s appropriately aggressive fiscal actions, made necessary by the twin public health and economic crises attributable to COVID-19, do not exacerbate the pre-existing long-term structural imbalance between spending and revenues.
Near-term policies that expand the debt need not be made permanent to be effective. If we decide as a nation that some of these policies are desirable on a permanent basis, or if new ideas are advanced to increase spending or cut taxes, we should make those decisions as part of a long-term plan with due consideration for the fiscal impact, including how they would be financed, and not in a crisis atmosphere.