The Congressional Budget Office (CBO) just released their baseline projections, showing high and rising debt and widening deficits in the coming years. CRFB will release a full analysis later today, but the report makes it abundantly clear that the national debt remains on an unsustainable path. The latest debt projections are slightly higher as a share of the economy than the previous projections made in August of last year.
Debt held by the public, currently at 77 percent of GDP, will grow to 89 percent by 2027, the highest total since 1947 and the fourth-highest in history. In dollar terms, debt will increase from $14.8 trillion at the end of FY 2017 to $24.9 trillion by 2027, a $10 trillion increase. Deficits will total $9.4 trillion (4 percent of GDP) over the next ten years and will increase from $587 billion (3.2 percent of GDP) in 2016 to $1.4 trillion (5 percent of GDP) by 2027. Trillion-dollar deficits will return by 2023.
CBO's latest projection is slightly worse compared to their previous projections last August, which showed debt rising to 85.5 percent of GDP by 2026 instead of 87 percent in the current forecast. Legislation passed since August increased ten-year deficits by $127 billion due to increased funding for Overseas Contingency Operations and emergencies in FY 2017 compared to FY 2016. Economic changes add $12 billion to deficits, the net result of lower revenue, higher primary spending, and lower interest spending. Finally, changes in technical assumptions reduce ten-year deficits by $133 billion, the net result of $433 billion of lower spending and $300 billion of lower revenue. Overall, ten-year nominal dollar deficits are basically the same as before (just $6 billion higher), but since GDP is now slightly lower than previously projected, the debt-to-GDP ratio is now higher.
Change in CBO's Baseline Budget Projections
|Source of Change||2017-2026|
|Prior Baseline Projections||$8.571 trillion|
|Legislative Changes||$127 billion|
|Economic Changes||$12 billion|
|Technical Changes||-$133 billion|
|Jan 2017 Baseline Projections||$8.577 trillion|
|Change in Baseline Deficits (2017-2026)||$6 billion|
Source: CBO. All numbers include debt service.
CBO's latest budget projections show the challenging fiscal situation facing President Trump and the new Congress. Deficits and debt will be increasing as a share of the economy over the next decade on top of already-high debt. Lawmakers should not only not dig the hole deeper, something they did during the last Congress, but take the steps necessary to address the unsustainable trajectory of debt.
Check our website later today for more complete analysis of CBO's new report.