A "Cheat Sheet" to Our Recent Work on Debt
Over the past month, we've been explaining different elements of CBO's recent budget outlook. Below is a summary of our recent work.
Decade of Debt: CBO’s latest long-term budget outlook painted a grim picture. Trillion-dollar annual deficits return indefinitely in two years, and debt could overtake the size of the entire economy in a little more than 10 years.
Midcentury Mayhem: We looked into the crystal ball another two decades beyond CBO, and the numbers go from grim to gruesome. Debt could reach 150 percent the size of the economy under current law in 30 years and 190 percent under current policy. In the latter case, debt would reach twice the size of the economy by mid-century.
Budget Barometer: So just how bad is it? Our budget barometer breaks it down as a percent of the economy (GDP), a better metric than dollars for comparing across history. Set your barometer HERE.
Minimum Payment Due: Where there is debt, there are interest payments. CBO estimates that interest—the fastest growing part of the budget—will more than triple and will near one-trillion dollars annually within a decade. That will be more than we spend each year on defense or Medicaid, and as a share of GDP, it could be the highest in history.
What’s One More?: What if interest rates are one point higher? $1.9 trillion in extra costs.
Taxes Unreformed: The latest numbers from CBO show recent tax cuts will add $1.9 trillion to the debt, accounting for interest and economic growth. If expiring parts are extended, that cost rises to $2.7 trillion. Of the many tax breaks and expenditures in the tax code, only one major one was eliminated under the bill.
Don’t Ask and You Shall Receive: The massive bipartisan spending deal actually spent more than either side even asked for, increasing this year’s discretionary spending caps by a whopping $143 billion and paving the way for a 13 percent spending boost.
Double the Deficit: After an unprecedented debt binge by Congress, the dust has settled and we estimate that 55 percent of next year’s deficit will be a result of legislation passed since 2015—mostly last year’s tax cuts and this year’s bipartisan spending deal.
Don’t Blame the Messenger: New National Economic Council Director Larry Kudlow recently said CBO is "always wrong, especially, with regards to tax cuts.” FALSE.
Trust Fund Clock is Ticking: Four major trust funds (Social Security retirement, Medicare Hospital, Social Security disability, and highways) run out of full funding during the next 13 years, according to CBO projections. Mark your calendar HERE.
Where’s the Budget?: April 15th was the statutory deadline for Congress to produce a budget, and it doesn’t look like Congress has any intention of doing one. Unfortunately, this is nothing new. Since 1985, this deadline has only been met four times. Here are some ways lawmakers could fix the broken system.
Balancing the Budget: The House voted on a balanced budget amendment to the Constitution with no actual plan to balance the budget—perhaps because it won’t be easy. We estimate that balancing the budget in ten years would require savings of between $7 trillion and $10 trillion, while just stabilizing the debt at its already high level would require $5.4 trillion to $8 trillion.
We’re Number One: The International Monetary Fund recently projected debt as a share of GDP will decline over the next five years for all advanced economies in the world except for one: Spoiler Alert: It’s the U.S.A.
Charting the Course: If visuals are your thing, check out our chartbook illustrating a deteriorating fiscal future.