CBO: Projected Record Debt Per Capita Threatens Economic Growth
WASHINGTON -- The Congressional Budget Office (CBO) today released its 2023 Long-Term Budget Outlook. Sen. Chuck Grassley (R-Iowa), ranking member of the Senate Budget Committee, issued the following statement about the report.
"This report paints a dire picture of the far-reaching implications of our fiscal status quo. If we don't get serious about reining in spending, reducing annual budget deficits and bringing down the debt, the country will end up spending more on interest payments than the programs that actually benefit Americans. The government is not a bottomless money pit, despite the way Democrats are operating, and this report is an alarm to reverse course. Failure to act will have significant negative consequences for American households and the economy at large" Grassley said.
This new report contains CBO's projections about how the budget and economy will look under existing laws for the next 30 years. The report also confirmed the Fiscal Responsibility Act (Public Law 118-5) reduces discretionary outlays and projections of long-term debt.
Findings from the 2023 CBO Long-Term Budget Outlook:
- Over 30 Years Debt Swamps the Economy. After hitting a historical high of 107 percent of GDP in 2029, federal debt held by the public is projected to reach 181 percent of GDP by the end of 2053. The current historical peak for debt of 106 percent of GDP occurred immediately after World War II in 1946.
- Supersized Deficits. Annual deficits, which averaged 3.6 percent of GDP over the past 50 years, increase to 5.8 percent of GDP in 2023 before ballooning to 10 percent of GDP in 2053.
- The Republican-Led Fiscal Responsibility Act Decreased Long-Term Debt. Since February of 2023, CBO has revised their projections of federal debt held by the public in 2053 from 195 percent of GDP to 181 percent of GDP with the change due to lower spending projections “largely attributable to the effects of the Fiscal Responsibility Act.” Grassley supported the Republican-led measure. More action is necessary to promote fiscal sustainability.
- Bloated Spending Outpaces Tax Collections as a Share of the Economy. CBO continues to project that spending and revenues will exceed their 50-year historical averages of 21.0 percent and 17.4 percent of GDP, respectively. Over the next 30 years, spending averages 25.7 percent of GDP while revenues average 18.4 percent of GDP. Overall, the growth of spending is projected to outpace the growth of revenues, despite both being above historical averages.
- Interest Costs Dominate the Budget of the Future. After averaging approximately two percent of GDP over the past 50 years, spending on interest reaches 6.7 percent of GDP in 2053. At that point, ballooning interest expenses will dwarf the cost of discretionary programs (5.4 percent of GDP) and Social Security (6.2 percent of GDP).
- Mandatory Health Care Spending Accelerates. CBO projects on net that spending on health care programs, growing faster than the economy, will increase from 5.8 percent of GDP in 2023 to 8.6 percent of GDP in 2053. Increased health spending is driven largely by rising health care costs per person.
- Social Security Continues to Steer Towards Insolvency. CBO projects the Old-Age and Survivors Insurance Trust Fund will be exhausted in Fiscal Year 2032, one year earlier than projected last year. CBO projects the Disability Insurance Trust Fund will be exhausted by 2052, which is four years later than projected last year. If both trust funds are combined, CBO continues to project the funds will be exhausted in Fiscal Year 2033.
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