In our paper on the President's budget, we noted that the budget would only temporarily stabilize the debt as a percent of GDP. In fact, it would rise from roughly 77 percent in 2022 to 93 percent in 2035 and about 125 percent in 2050. Where did those numbers come from? There's a section in the President's budget called "Supplemental Materials" that contains a spreadsheet detailing the 75-year outlook for debt, deficits, spending, and revenue, along with numbers for alternative scenarios based on different economic and budget assumptions.
In the base scenario, debt rises steadily from the 2020s on, reaching about 190 percent of GDP by 2085. It would certainly be a nightmare to have debt that high, though it would be a large improvement over the CRFB Realistic baseline, which has debt at 477 percent of GDP in the same year.
Revenue gradually rises from its 2022 level of 20 percent of GDP to about 21 percent by the 2080s. This increase is actually smaller than the CRFB Realistic baseline, because OMB does not assume that revenue rises as a percent of GDP as real incomes rise. This assumption of essentially frozen revenue as a percent of GDP is similar to CBO's long-term Alternative Fiscal Scenario, but different from CRFB Realistic, which allows rising incomes to push up revenue. Revenue only rises as a share of GDP in OMB's projection due to the growing reach of the excise tax on high-cost health insurance plans.
Spending rises much faster than revenue, going from 23 percent to 30 percent over the same time period. Most of this is due to increased spending for interest on the growing debt. Primary (non-interest) outlays only rise by about two percentage points of GDP over the same time period, from 19.4 percent to 21.4 percent.
Even with these extraordinarily high debt numbers, there is still an optimistic assumption about health spending. The numbers show that Medicare and Medicaid spending combined would be frozen at about 8 percent of GDP from the 2050s onward. While this is consistent with the Medicare Trustees, it also relies on provider payment reductions that the Chief Actuary at the Center for Medicare and Medicaid Services views as unsustainable.
An alternative scenario with what may be more realistic assumptions about health care--albeit, ones that may actually be a little too pessimistic--has debt reaching 550 percent of GDP in 2085, with health spending taking up 23 percent of GDP. These assumptions have a growth rate of two percentage points above GDP per capita, roughly the historical average since 1960, but slightly higher than the average over the past two decades.
OMB also provides a number of other alternative scenarios. These scenarios involve fiscal variables, like different amounts of revenue, and economic variables, like productivity. Other alternatives include demographic variables like birth rates, death rates, and net immigration that also affect long-run economic performance. You can see all the numbers associated with these alternative projections in OMB's spreadsheet.
The long-term outlook shows that even though the President's budget stabilized debt at the end of the decade, it would not prevent a steep rise beyond the ten-year window. Even with optimistic health care assumptions, debt would grow to unprecedented levels by mid-century.