The Congressional Budget Office (CBO) recently published An Update to the Budget and Economic Outlook: 2017 to 2027. The purpose of the report is to revise its baseline projection of federal spending and revenues for the next ten years using the latest economic and budgetary data. CBO is required to produce the report using an assumption that current laws on taxes and outlays will generally remain unchanged. Under this scenario, CBO projects that federal debt will grow by $11 trillion over the next ten years. Even though the baseline is intended “to provide a neutral benchmark that policymakers can use to assess the potential effects of policy decisions.” By any measure, the report should serve as a resounding alarm about the long-term fiscal imbalance. Barring significant reforms, there are several factors that will likely drive the debt even higher than CBO projected.
Last January, CBO projected that the debt would rise to $24.9 trillion in 2027, comprising 88.9 percent of GDP. The forecast has been downgraded in the new report to $25.5 trillion, and over 91 percent of the economy. Under current law, tax receipts will continue to fall short of rising obligations for entitlement programs. Annual deficit spending and rising interest rates will increase net payments on the federal debt, which will more than triple in size in ten years from $269 billion to $818 billion. Without a significant turnabout in fiscal policy, there are good reasons to expect that the actual debt ten years out will be higher than CBO projects:
There is always a degree of uncertainty in budgetary and economic projections, but the trend has been for CBO to lowball its long-term debt projections. Congress and the Administration are working on a reform agenda that could boost economic growth and slow growth in annual expenditures. But, progress will ultimately depend on addressing the unfunded liabilities in the federal entitlement programs that are driving the growth in spending.
Consensus will be required to tackle Washington’s over-spending addiction. Lawmakers looking for a place to start reaching across the aisle should turn to NTUF’s and PIRG’s Common Ground report of commonsense budget reforms.
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