The nonpartisan Congressional Budget Office released the annual Long-Term Budget Outlook, which provides the official long-term forecast for budget deficits, national debt, and government spending. Here’s what you need to know.
Without changes, deficits and debt will rise without end.
- The era of declining deficits is over. The federal budget deficit will increase this year and continue on an upward path.
- National debt held by the public will rise from the current level of 75 percent of the economy, which is a post-war record and nearly twice the historical average, to 141 percent of the economy by 2046 and be on an upward path.
- Debt will exceed the size of the economy by 2033 and surpass the all-time record of 106 percent of the economy by 2035.
Autopilot spending will drive debt upwards, even though the rest of the budget will shrink.
- An aging population and rising health care costs will increase spending on Social Security and federal health care programs like Medicare and Medicaid.
- Interest on the debt will be the fastest growing part of the federal budget and is forecast to double as a share of the economy in eight years.
- These spending items are essentially on autopilot with little oversight and have been largely untouched by deficit reduction efforts so far.
- Spending on the rest of the budget – such as investments in education, infrastructure and research that can boost economic growth and standard of living – will decline to the lowest share of the economy in over 70 years.
Growing debt threatens economic growth, but sensible deficit reduction can improve it.
- Average income will grow more slowly over the next 30 years if Congress continues adding to the debt compared to if debt is placed on a downward path. In today’s dollars, that’s $7,000 less income per person.
- Growing debt also increases the risk of a fiscal crisis down the road and leaves the country less able to respond to crises that may arise.