Five Key Takeaways from the CBO Long-Term Outlook
Today, the nonpartisan Congressional Budget Office (CBO) released its 2019 Long-Term Budget Outlook, highlighting the significant fiscal challenges facing our nation.
1) Debt is historically high — and rising. Federal debt is already at its highest level since 1950 and under current law is projected to climb to 144 percent of gross domestic product (GDP) by 2049 — by far an all-time high. However, if lawmakers extend certain costly policies, debt would rise even higher — to 219 percent of GDP — in 30 years.
2) There’s a mismatch between revenue and spending. Rising debt is the result of a structural imbalance between revenues and spending. Under current law, spending growth, which is fueled primarily by the aging of the population, rising healthcare costs, and mounting interest payments, will significantly outpace the projected growth in revenues.
3) Interest costs are projected to triple. As the debt grows, the cost of paying interest on the debt is projected to increase rapidly. Such payments are projected to more than triple relative to the size of the economy, growing from 1.8 percent of GDP in 2019 to 5.7 percent in 2049.
4) Interest is a key driver of deficits. The rapid rise in interest costs will propel substantial growth in future deficits. In fact, starting in 2020, net interest will exceed the primary deficit — and stay that way indefinitely.
5) Acting sooner is better. The longer policymakers wait to address this challenge, the bigger the changes will have to be.
The good news is that it’s not too late to adjust course. Learn more about the Solutions Initiative, in which seven think tanks from across the political spectrum each put forward comprehensive budgets to significantly reduce our national debt.
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Further Reading
House Reconciliation Bill Would Add Trillions to the National Debt
The bill would increase debt by $3.0 trillion over the next 10 years, driving it from nearly 100 percent of GDP now to 124 percent of GDP by 2034.
House Reconciliation Bill Would Increase the National Debt by More Than Any Other Recent Legislation
The House recently passed the largest reconciliation bill ever. CBO estimates it would add $2.4 trillion (excluding interest) to the national debt over 10 years.
United States Is Borrowing at a Higher Rate than the Global Average, Warns IMF
New IMF reports serve as a warning to all countries that global fiscal and economic conditions are veering into dangerous territory.