CBO Shows an Unsustainable Long-Term Fiscal Path
The Congressional Budget Office (CBO) today released its 2016 Long-Term Budget Outlook, showing a clearly unsustainable long-term path for the federal debt. The projections extend for 30 years, building upon CBO's more frequently released ten-year projections, and the further they extend, the worse the fiscal picture becomes.
CBO projects that debt will rise from about 75 percent of Gross Domestic Product (GDP) today to 86 percent of GDP by 2026 and then continue growing to 141 percent of GDP by 2046. These numbers are clearly worse than last year (2040 debt is 122 percent of GDP compared to 107 percent last year) as a result of last year's December tax cut and budget deal.
This growing debt is the result of widening deficits as the growth of Social Security and health care spending outpaces revenue. Deficits will grow from 2.9 percent of GDP in 2016 to 4.9 percent by 2026 and 8.8 percent by 2046. These deficits are driven mostly by growth in Social Security, health care, and interest spending, which rise from a combined 11.9 percent of GDP in 2016 to 20.9 percent by 2046, increasingly diverging from revenue.
CBO's projections show a fiscal future with debt rising to unprecedented levels, and spending dedicated only to paying interest on the debt taking up a large and growing share of the budget. Lawmakers will need to make significant reforms to the budget to ensure debt is sustainable and the federal government has the fiscal space to budget effectively.
Stay tuned to CRFB.org for more analysis on the Long-Term Budget Outlook today throughout the week.