June 25, 2019

Five Key Takeaways from the CBO Long-Term Outlook

Today, the non-partisan 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.

Federal debt is on an unsustainable path

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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.

The growing debt is caused by a structural mismatch between spending and revenues

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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.

Net interest costs are projected to rise sharply

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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.

Rising interest costs are the primary factor in projected growth in annual deficits

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5) Acting sooner is better. The longer policymakers wait to address this challenge, the bigger the changes will have to be.

Waiting to act raises the cost of stabilizing the debt

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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.


Related: The Budget Process


Image credit: Photo by Hisham Ibrahim/Getty Images
 

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