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What's the Long-Term Budget Outlook

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The Congressional Budget Office (CBO) released two new outlooks in september that highlight our nation's unsustainable budget trajectory over the next decade and beyond. From the federal debt reaching almost double the size of the economy by 2050, to deficits higher than in any point in modern history, CBO's report shows that our nation's fiscal outlook is much worse than estimated last year.

Published in: Economy & Finance
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What's the Long-Term Budget Outlook

  1. 1. CRFB.org
  2. 2. CRFB.org $400 $1,000 $1,600 $2,200 $2,800 $3,400 2009 2012 2015 2018 2021 2024 2027 2030 March 2020 Current Law $1.4 trillion $984 billion Pre-COVID, We Were Facing Trillion-Dollar Deficits Source: Congressional Budget Office. Billions
  3. 3. CRFB.org $400 $1,000 $1,600 $2,200 $2,800 $3,400 2009 2012 2015 2018 2021 2024 2027 2030 March 2020 Current Law September 2020 Current Law $3.3 trillion $1.4 trillion $984 billion $1.6 trillion CBO Now Projects Deficits Will Triple This Year Source: Congressional Budget Office. Billions
  4. 4. CRFB.org $400 $1,000 $1,600 $2,200 $2,800 $3,400 2009 2012 2015 2018 2021 2024 2027 2030 March 2020 Current Law September 2020 Alternative Scenario September 2020 Current Law $3.3 trillion $1.4 trillion $984 billion $1.6 trillion $2.3 trillion And Deficits Will Remain High Source: Congressional Budget Office. Billions
  5. 5. CRFB.org 98% 60% 70% 80% 90% 100% 110% 120% 130% 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 March 2020 Current Law Debt Will Reach a New Record Soon Source: CRFB Calculations based on Congressional Budget Office data. Percent of GDP
  6. 6. CRFB.org 98% 109% 60% 70% 80% 90% 100% 110% 120% 130% 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 March 2020 Current Law September 2020 Current Law Debt Will Reach a New Record Soon Source: CRFB Calculations based on Congressional Budget Office data. Percent of GDP
  7. 7. CRFB.org 98% 121% 109% 60% 70% 80% 90% 100% 110% 120% 130% 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 March 2020 Current Law September 2020 Alternative Scenario September 2020 Current Law Debt Will Reach a New Record Soon Source: CRFB Calculations based on Congressional Budget Office data. Percent of GDP
  8. 8. CRFB.org Near-Term Deficit Increases Stem from COVID Reponses
  9. 9. CRFB.org 2020 2020-2030 Deficits Projected in March 2020 $1,073 billion $14,164 billion COVID Relief Legislation $2,317 billion $2,802 billion Paycheck Protection Program $541 billion $541 billion Expanded Unemployment Benefits $370 billion $442 billion Recovery Rebates $272 billion $281 billion Other Spending $594 billion $954 billion Revenue Reductions* $539 billion $385 billion Non-COVID Legislation – Great American Outdoors Act <$1 billion $17 billion Debt Service $2 billion $182 billion Economic Changes $316 billion -$1,089 billion Lower Revenue Collection $223 billion $2,300 billion Higher Unemployment Insurance Spending $128 billion $253 billion Lower Social Security and Medicare Spending $0 billion -$805 billion Other Primary Spending Revisions $9 billion -$418 billion Reduced Interest Payments from Lower Nominal Rates -$45 billion -$2,380 billion Debt Service $0 billion -$40 billion Technical Changes -$396 billion $420 billion Revenue Differences, Including Lower Take-up of Payroll Tax Deferral* -$425 billion $310 billion Higher SNAP Spending $2 billion $156 billion Other Primary Spending Revisions $29 billion -$12 billion Reduced Interest Payments from Different Maturities -$3 billion -$62 billion Debt Service $1 billion $28 billion Total Change in Deficits $2,237 billion $2,133 billion Deficits Projected in September 2020 $3,311 billion $16,297 billion*CBO classifies spending revisions of relief legislation as legislative, but the revenue changes (which are hard to disaggregate) as technical even though a “significant factor” is a revised response to legislation. Source: Congressional Budget Office. Near-Term Deficit Increases Stem from COVID Reponses
  10. 10. CRFB.org 32.0% 23.0% 15.5% 17.8% 10% 15% 20% 25% 30% 35% March 2020 Current Law September 2020 Current Law But Structural Imbalances Remain Source: Congressional Budget Office. Percent of GDP
  11. 11. CRFB.org 11 2005 2019 2020 2030 2040 2050 Spending 19.1% 21.0% 32.0% 23.1% 27.1% 31.2% Social Security 4.0% 4.9% 5.3% 6.0% 6.3% 6.3% Health Care 3.7% 5.3% 6.1% 6.9% 8.2% 9.2% Other Mandatory 2.4% 2.7% 11.0% 2.3% 2.1% 2.0% Discretionary 7.5% 6.3% 8.0% 5.8% 5.6% 5.6% Net Interest 1.4% 1.8% 1.6% 2.2% 4.9% 8.1% Revenue 16.8% 16.3% 16.0% 17.8% 18.1% 18.6% Deficit 2.5% 4.6% 16.0% 5.3% 9.0% 12.6% Debt 35.8% 79.2% 98.2% 108.9% 142.2% 195.2% Spending Under the AS 19.1% 21.0% 32.0% 24.0% 28.9% 34.0% Revenue Under the AS 16.8% 16.3% 15.9% 16.6% 17.0% 17.4% Deficit Under the AS 2.5% 4.6% 16.1% 7.4% 11.9% 16.5% Debt Under the AS 35.8% 79.2% 98.2% 121.3% 172.4% 246.3% Health, Retirement, and Interest Costs Will Grow Source: Congressional Budget Office, CRFB calculations. Percent of GDP
  12. 12. CRFB.org 12 9.1% 12.6% 16.5% 1% 5% 9% 13% 17% 21% 2002 2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050 2019 Long-Term Outlook 2020 Long-Term Outlook 2020 Alternative Scenario Exploding Long-Term Deficits Source: Congressional Budget Office, CRFB calculations. Percent of GDP
  13. 13. CRFB.org 13 144% 195% 246% 30% 60% 90% 120% 150% 180% 210% 240% 270% 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2019 Long-Term Outlook 2020 Long-Term Outlook 2020 Alternative Scenario And Driving the Debt to New Highs Source: Congressional Budget Office, CRFB Calculations. Percent of GDP
  14. 14. CRFB.org 14 2019 Projection of Debt to GDP in 2049 144 percent of GDP COVID Relief Legislation +10 percent of GDP Bipartisan Budget Act of 2019 +16 percent of GDP Repeal of health-related taxes +10 percent of GDP Reduction in projected nominal GDP +10 percent of GDP Other Changes and Interactions -1 percent of GDP 2020 Projection of Debt to GDP in 2049 189 percent of GDP The Long-Term Outlook Is Worse than Last Year Source: Congressional Budget Office, CRFB calculations.
  15. 15. CRFB.org Rising Debt Will Slow GDP Growth by 0.2% per year and Reduce Annual Per Person Income by $6,300 Source: Congressional Budget Office.
  16. 16. CRFB.org 16 Interest Will Become the Largest Federal Government Program Source: Congressional Budget Office.
  17. 17. CRFB.org 0% 100% 200% 300% 400% 500% 2010 2015 2020 2025 2030 Medicare HI 2024 Highway 2021 Meanwhile, Insolvency Looms for Major Trust Funds Source: Congressional Budget Office. Percent Annual Spending
  18. 18. CRFB.org The Longer We Wait, the Harder It Will Be to Fix the Debt Source: Congressional Budget Office.

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