CBO Long Term Outlook Report ‘Doesn’t Look Good’

September 28, 2020 by Kate Michael
CBO Long Term Outlook Report ‘Doesn’t Look Good’
The U.S. Capitol as seen from the national botanical garden fountain. (Photo by Dan McCue)

WASHINGTON — The Congressional Budget Office recently released two new outlook reports. These projections are an update of the U.S. deficit, debt, spending, and revenue over the next decade and beyond, given current laws in place. The pair of reports highlight the nation’s unsustainable budget trajectory. 

CBO frequently releases baseline revenue projections, both for ten year increments and for longer-term 30 year outlooks. The last baseline report was released in March 2020, though this report held exclusively pre-pandemic data, “when all we were dealing with was a fiscal crisis on the horizon,” according to Mark Goldwein, senior policy director for the Committee for a Responsible Federal Budget, who offered an in-depth analysis of the committee’s findings from the CBO reports. 

“Pre-COVID, we were facing trillion dollar deficits even with strong economic data,” Goldwein said. Now that CBO has released its first post-COVID 10-year baseline, the analyst fears “this crisis turned what was already bad into a massive, unheard of deficit.” 

Predictably, the CBO reports suggest that the nation’s fiscal outlook is worse than estimated last year. It reveals deficits higher than at any point in modern history, with federal debt reaching almost double the size of the economy by 2050. 

“We are on an unsustainable fiscal path, folks,” Goldwein warned. 

The CBO’s latest projections have dire implications for the nation’s long term fiscal health and economic growth. It seems the nation has advanced its bad debt situation by a decade, and the outlook shows that the U.S. won’t be able to raise enough to offset it. There is a drop in tax revenue expected along with the decline in output and employment from the coronavirus, which, given the government’s large increase in spending, leads to a spike in the federal budget deficit. 

“If we’re not raising enough, the more interest we incur… interest is the fastest growing part of our budget… so interest will [soon] be our single largest government program. And this is the optimistic ‘in current law scenario,’” Goldwein said, suggesting that future administration’s budget priorities could set the nation back even farther. 

In the pre-COVID CBO report, this year alone, debt was projected to raise another 20%, but now CBO projects debt will reach 98% of the total U.S. economy this year.

“The long-term debt outlook is bad [even] when the coronavirus is far behind us,” Goldwein said. “Every dollar spent on interest is a dollar we cannot spend on something else. [This] is going to play into a long-term national debt. And the longer we take to fix the debt, the harder it will be.”

Of course, much of current overspending is primarily due to the pandemic response, but the nation’s trajectory was already dismal. 

“Trump entered office with an already precarious fiscal situation,” Goldwein explained. The aging of the U.S. population means more people are collecting government benefits and health care costs are growing rapidly while at the same time GDP is experiencing “dismal economic growth.” 

“The trust funds are in trouble. Every major trust fund is projected to run out in the next 11 years,” Goldwein forewarned. “That means somebody 62 today will be 73 when Social Security runs out.”

And despite the U.S. dollar currently serving as the global reserve currency, Goldwein argues that the U.S. deficit does matter. It matters very much.

“So long as the U.S. has… a relatively stable political system, we have higher debt capacity, but deficits still matter,” he said. “Even if we can borrow it, that doesn’t mean that debt is costless. We can be the most credible debtor in the world and still fail. 

“There is no guarantee that we’ll maintain credibility – it’s one of those things you have until you don’t — so this may be a situation of ‘the bigger they are, the harder they fall.’”

And as for money-financing U.S. debt, or the Macroeconomic Monetary Theory that proposes governments controlling their own currency can freely spend and print more money to pay off debts in their own currency, Goldwein cautions that “most credible economists don’t think we can live in a way that’s money-financed. It usually ends in hyper-inflation.”

So according to Goldwein’s analysis, the future is bleak and needs a plan. He admits that all that can be done now is to focus on coronavirus response, but he stresses that the U.S. needs to phase in debt reduction as soon as possible. 

“I don’t think anyone thinks that during the pandemic the focus should be austerity, but we need to start a plan to reduce it,” Goldwein said, specifically looking to the presidential candidates for their budget proposals. “I would love for candidates to have a plan to reduce debt, to pay for their stuff,” he said. “ And what are we going to do about the trust funds?”

A+
a-
  • Congressional Budget Office
  • Federal budget
  • federal deficit
  • long-term fiscal outlook
  • In The News

    Health

    Voting

    Federal Budget

    Senate Passes $1.2T Funding Package in Early Morning Vote

    WASHINGTON (AP) — The Senate passed a $1.2 trillion package of spending bills in the early morning hours Saturday, a long overdue... Read More

    WASHINGTON (AP) — The Senate passed a $1.2 trillion package of spending bills in the early morning hours Saturday, a long overdue action nearly six months into the budget year that will push any threats of a government shutdown to the fall. The bill now goes to President... Read More

    March 21, 2024
    by Dan McCue
    $1.2T Spending Plan Unveiled Ahead of Saturday Shutdown Deadline

    WASHINGTON — House and Senate leaders released an over-$1.2 trillion, six-bill appropriations package early Thursday morning, giving lawmakers less than... Read More

    WASHINGTON — House and Senate leaders released an over-$1.2 trillion, six-bill appropriations package early Thursday morning, giving lawmakers less than 48 hours to pass it ahead of the midnight Friday deadline to avoid a partial government shutdown. The 1,012-page package, which was released just before 3... Read More

    House Tees Up Vote to Keep Money Flowing to Several Key Federal Agencies

    WASHINGTON (AP) — The House is expected to vote to keep money flowing to scores of federal agencies before a... Read More

    WASHINGTON (AP) — The House is expected to vote to keep money flowing to scores of federal agencies before a midnight Friday shutdown deadline even as many members of the Republican conference are expected to vote against it. The first package of six bills expected to... Read More

    March 1, 2024
    by Dan McCue
    Senate Approves Stopgap Spending Extension, Averting Shutdown

    WASHINGTON — The Senate on Thursday night voted in favor of a “laddered” proposal from the House to extend funding... Read More

    WASHINGTON — The Senate on Thursday night voted in favor of a “laddered” proposal from the House to extend funding for some federal departments and agencies through March 8 and the rest through March 22. The 77-13 vote, which came just hours after the Republican-led House... Read More

    February 29, 2024
    by Dan McCue
    House Passes Short-Term Spending Bill to Avert Shutdown

    WASHINGTON — The House on Thursday overwhelmingly approved a two-tiered short-term spending bill to avert a partial government shutdown this... Read More

    WASHINGTON — The House on Thursday overwhelmingly approved a two-tiered short-term spending bill to avert a partial government shutdown this weekend. The measure now moves to the Senate, where Majority Leader Chuck Schumer, D-N.Y., has said it could pass as soon as tonight. House Speaker Mike... Read More

    February 23, 2024
    by Dan McCue
    Government Begins Preparing for Partial Shutdown

    WASHINGTON — Federal agencies got their first concrete indication the threat of a looming government shutdown is getting serious on... Read More

    WASHINGTON — Federal agencies got their first concrete indication the threat of a looming government shutdown is getting serious on Friday, as the White House Office of Management and Budget began circulating its guidance to those who will be impacted if lawmakers fail to reach a... Read More

    News From The Well
    scroll top