New CBO Budget Projections Show Toll of Budget-Busting Legislation
The Congressional Budget Office (CBO) just released its latest baseline, projecting high and rising debt made worse by recent legislation. CBO projects that debt held by the public will rise by $12.6 trillion over the next decade, from 78 percent of Gross Domestic Product (GDP) this year to 95 percent by 2029. CBO projects debt will be $867 billion and 3 percent of GDP higher in 2029 than in its May projection. The recent budget deal is responsible for $1.7 trillion of that increase, while other factors partially offset that impact by $800 billion.
In terms of annual borrowing, CBO projects deficits to total $960 billion (4.5 percent of GDP) this year, cross the $1 trillion mark next year, and rise to $1.5 trillion (5.0 percent of GDP) by 2028.
Growing deficits and debt reflect a continued disconnect between spending and revenue. Next year, spending will be 0.7 percentage points above its historical average of 20.3 percent of GDP, while revenue will be 1 percentage point below its historical average of 17.4 percent. Spending will grow to 22.7 percent of GDP by 2029, while revenue will grow to 18.2 percent, mostly due to the expiration of large parts of the 2017 tax law (revenue would be 17.3 percent of GDP in 2025 just before the expirations).
The fiscal picture is clearly worse than CBO projected in May. Total deficits are projected to be $872 billion higher through 2029 due to the $1.7 trillion cost of the spending increase in the Bipartisan Budget Act of 2019 and about $250 billion from additional disaster relief appropriated earlier in the year. Economic revisions offset this increase by $1.3 trillion mostly due to lower interest rate projections. Technical revisions add $279 billion to deficits due to lower expected income tax revenue.
Change in CBO's Budget Projections
|Source of Change||2019-2029 Deficit Change|
|May 2019 Baseline Projection Deficits||$12.3 trillion|
|Legislative Changes||$1.9 trillion|
|Economic Changes||-$1.3 trillion|
|Technical Changes||$279 billion|
|August 2019 Baseline Projection Deficits||$13.2 trillion|
Source: Congressional Budget Office.
As CBO's latest projections confirm, this year's budget deal has made an already challenging fiscal outlook considerably worse. Lawmakers have now put the federal government in an even bigger hole than it already was.
The Committee for a Responsible Federal Budget will be releasing its full analysis later today.