CBO Releases Long-Term Budget Outlook
It's here — CBO has released its updated long-term baseline. Since December, many commentators have attempted to see where we stand since the fiscal cliff deal and recent slowdown in health care cost growth, coming to very different conclusions. But while CBO's projections show the outlook has improved somewhat since last year's Long-Term Outlook, it’s clear the country is still on an unsustainable path.
Debt is projected to decline in the near-term in the Extended Baseline Scenario (EBS), from 73 percent of GDP in 2013 to 68 percent in 2018, but permanently reverses course thereafter. Debt will rise on a clear upward path, reaching 73 percent of GDP by 2025, 93 percent by 2035, 129 percent by 2050, and 233 percent by 2085. It's a sharp contrast to last year's Extended Baseline prior to the fiscal cliff that showed debt on a steadily declining path. While that scenario would have involved going over the fiscal cliff and making unwise policy decisions, lawmakers can no longer rely on letting current law to take effect in order to put the budget on a sustainable path — instead, lawmakers will need to be proactive.
While in the past CBO has produced a more pessimistic Alternative Fiscal Scenario baseline, that highlighted the high debts associated with continuing current policy, they have not presented a full Alternative Fiscal Scenario this year. The scenario they do present assumes that policymakers continue to allow the cuts from sequestration, do not enact yearly "doc fixes," do not extend various tax provisions, and allow revenue to grow indefinitely as a share of the economy. Without these assumptions, the fiscal situation could be significantly worse (though importantly, the current projections continue disaster and war spending at current levels which would partially offset the costs described above).
It is time for lawmakers to look at the tough choices that are before them and work toward a bipartisan agreement. Jumping from crisis to crisis with one short-term solution after another is not going to change the skyrocketing trajectory of our debt. Instead of focusing on the next month and the next election, policymakers should focus on the next decade and the next generation.
Later today, we will be releasing our full analysis of CBO's new long-term outlook in a report and we will be following up with a series on the long-term report in the following two weeks. Stay tuned for more analysis.