The Concord Coalition said today that updated projections on the federal budget reinforce the need for presidential candidates in both parties to explain how they would curb the growth of the national debt over the next decade and beyond.
“Even with declining short-term deficits and slowing health care costs, Washington clearly remains on an unsustainable fiscal path,” says Robert L. Bixby, Concord’s executive director. “The federal debt is already quite high by historical standards, and the new projections confirm that Washington must make fundamental policy changes to avoid adding $7 trillion — and perhaps much more — to the federal debt over the next 10 years. The presidential candidates need to let voters know what they intend to do about that if elected.”
In its report today, the Congressional Budget Office (CBO) offers new 10-year baseline projections for the nation’s spending programs and revenue collection, along with an updated economic outlook. Stronger-than-expected revenues will help reduce this year’s deficit to $426 billion (2.4 percent of GDP), an improvement of $59 billion (0.4 percent of GDP).
Overall, however, the report says the budget outlook for this period “does not differ substantially” from what CBO projected in March. Baseline projections are based on current law and do not take into account deficit-increasing policies that tend to get passed on a yearly basis — like the extension of numerous targeted tax breaks.
The latest report again highlights the growing pressures on the federal budget, largely as the result of an aging population, rising health care costs, and soaring interest payments on the debt in the years ahead. Social Security, the major health care programs and interest payments are all projected to grow as a share of the economy while all other programs are projected to shrink.
In total, CBO projects that federal spending will rise from 20.6 percent of GDP in 2015 to 22.0 percent of GDP by 2025 while revenues tick up just slightly, from 18.2 percent of GDP to 18.3 percent.
Under current law, CBO says, deficits over the next decade could push federal debt held by the public to 77 percent of GDP — up from 74 percent now, and roughly twice the average level over the past five decades.
“The structural mismatch between the federal government’s spending and tax policies is made abundantly clear in CBO’s report,” Bixby says. “There are no mysteries here for anyone who is open to looking at the basic facts.”
There were earlier red flags this summer when the CBO released its Long-Term Budget Outlook and the trustees of Medicare and Social Security issued their annual reports on those two troubled programs.
The Long-Term Outlook warned of even greater fiscal difficulties beyond 2025 unless Washington pursues extensive changes well before then. The trustees reiterated that Medicare and Social Security should be repaired soon, with particularly urgent concerns about the Disability Insurance Trust Fund running dry next year.
The updated CBO projections come as President Obama and Congress prepare to square off over a number of pressing fiscal deadlines.
Government agency funding will run out on Oct. 1, forcing a disruptive shutdown absent agreement on appropriations for Fiscal Year 2016. By the end of October, lawmakers will need to tackle the long-term shortfall facing the Highway Trust Fund. Soon after that, the statutory debt limit will need to be raised. Before the end of the year lawmakers will also have to decide whether to extend a number of expired tax breaks and how to make up the lost revenue, if at all.
Today CBO also released a report on the debt limit, saying that the special measures being used by the Treasury to avoid breaching the limit would be exhausted sometime between mid-November and early December. The Concord Coalition has long urged Congress to avoid unnecessary brinksmanship by raising the debt limit sooner rather than later.
“What used to be ‘regular order’ in the congressional budget process has turned into ‘regular chaos.’ Meanwhile, the broad picture remains one in which entitlement programs and interest payments will continue rising while other spending — in other domestic as well as defense programs — shrinks substantially as a share of the economy,” Bixby said. “Moreover, government revenue from our inefficient tax system would fall farther and farther behind federal spending. That’s not the path to national strength, growth and prosperity. And it certainly isn’t fair to our children and future generations.”
A copy of this release can be found here.