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CBO Presents Gloomy Long-Term Outlook

September 20, 2013—In a report released Sept. 17, the Congressional Budget Office (CBO) predicts that although the federal budget deficit “has shrunk noticeably” in FY 2013 and is projected to continue to decline for the next few years, the long-term budget outlook is much less positive.

In its annual Long-Term Budget Outlook, CBO projects that federal debt held by the public would be smaller relative to the size of the economy in 2018 than it is now.  However, the report warns “the aging of the baby-boom generation, together with growth in health care spending per person and an expansion of federal subsidies for health insurance, is expected to steadily boost the government’s spending for Social Security and major health care programs.”  Unless current law changes, CBO predicts this additional spending “would contribute to rising budget deficits starting in a few years, causing federal debt to swell from a level that is already very high relative to the size of the economy.”

CBO projects that, if current laws generally remain in place, federal spending for the major health care programs and Social Security would increase to a total of 14 percent of the gross domestic product (GDP) by 2038, twice the 7 percent average of the past 40 years.

Federal debt held by the public is now about 73 percent of GDP, higher than at any point in U.S. history except a brief period following World War II. If current laws generally remained in place, CBO projects federal debt held by the public would decline slightly relative to GDP over the next several years. After that, however, growing deficits would ultimately push debt back above its current high level and reach 100 percent of GDP in 2038. CBO also warns that debt would be on an upward path relative to the size of the economy, a trend that could not be sustained indefinitely.

The current report looks beyond the 10-year period covered by CBO’s regular baseline projections, focusing on the 25-year period ending in 2038, referred to as the “extended baseline.”  Both the regular and extended baselines assume that lawmakers will not make certain policy changes they have routinely made in the past; e.g., preventing sharp cuts to Medicare’s payment rates for physicians called for by law.


Dave Moore
Senior Director, Government Relations
Telephone: 202-828-0559


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