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CBO Projects Deficits Will Rise Again Beginning in 2016

February 7, 2014—In its annual budget and economic outlook, the Congressional Budget Office (CBO) projects federal deficits will start to rise beginning in fiscal year (FY) 2016 because revenues are expected to grow at roughly the same pace as nation’s gross domestic product (GDP) while spending is expected to grow more rapidly than GDP as a result of the aging of the population, expanding federal subsidies for health insurance, rising health care costs per beneficiary, and mounting interest costs on federal debt.

CBO’s report, released Feb. 4, estimates that under current law, the federal deficit will total $514 billion in FY 2014, compared with $1.4 trillion in FY 2009. CBO notes that this year’s deficit would equal 3.0 percent of GDP, which is the average percentage of GDP during the past 40 years.

The report includes baseline projections of what federal spending, revenues, and deficits would look like over the next 10 years if current laws governing federal taxes and spending generally remained unchanged. Under those assumptions, CBO projects the deficit to decrease to $478 billion in 2015.

CBO notes the large budget deficits in recent years have substantially increased federal debt, and the amount of debt relative to the size of the economy is now very high by historical standards. CBO estimates that federal debt held by the public will equal 74 percent of GDP at the end of this year and 79 percent in 2024.

The report warns, “Continued rising debt would dampen economic growth and thus reduce people’s income compared with what it would otherwise be. It would also increasingly restrict policymakers’ ability to use tax and spending policies to respond to unexpected challenges and would boost the risk of a fiscal crisis, in which the government would lose its ability to borrow at affordable rates.”

To avoid such consequences, CBO advises that “lawmakers will ultimately have to make significant changes to tax and spending policies — letting revenues rise more than they would under current law, reducing spending for large benefit programs below the projected amounts, cutting other federal spending to even lower levels by historical standards than currently projected, or adopting some combination of those approaches.


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


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