3 Takeaways from CBO’s Budget and Economic Outlook
Last Updated January 27, 2016
The outlook for the federal budget has worsened considerably since last year, according to a new report by the Congressional Budget Office (CBO). The sharp deterioration in the budget outlook stems from the large spending and tax bill that was enacted in December 2015, which increases deficits considerably over the next 10 years and beyond. CBO’s latest report highlights that America’s fiscal policy over the long-term remains unsustainable and threatens our future economy.
The CBO report finds that:
1. The federal budget has a structural mismatch between spending and revenues, which will lead to rising deficits over the next decade and beyond. Federal deficits will exceed the $1 trillion mark in 2022 and deficits will total $9.4 trillion over the next 10 years.
2. Interest costs on the debt will climb sharply. Over the next 10 years, net interest costs will total $5.8 trillion.
3. Federal debt is projected to rise to 86 percent of gross domestic product (GDP) in 2026 — double its 50-year average and higher than at any point since just after WWII. Debt levels thereafter will climb sharply as a share of GDP.
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Further Reading
The National Debt Can Crowd Out Investments in the Economy — Here’s How
Large amounts of federal debt could “crowd out” investments by the private sector, making the economy less productive and stunting wage growth.
Growing National Debt Sets Off Alarm Bells for U.S. Business Leaders
Debt rising unsustainably threatens the country’s economic future, and a number of business leaders have signaled their concern.
What Is R Versus G and Why Does It Matter for the National Debt?
The combination of higher debt levels and elevated interest rates have increased the cost of federal borrowing, prompting economists to consider the sustainability of our fiscal trajectory.