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CBO Issues Long-Term Budget Projections

July 18, 2014—In its annual Long-Term Budget Outlook, issued July 14, the Congressional Budget Office (CBO) reports the federal budget deficit this year has shrunk to roughly 3 percent of gross domestic product (GDP), its smallest size since 2007.

If current laws governing taxes and spending stay generally the same, CBO estimates the anticipated further strengthening of the economy and constraints on federal spending built into law would keep deficits between 2.5 percent and 3 percent of GDP through 2018.

In succeeding years, however, CBO estimates deficits would become notably larger under current law, in part because an aging population, rising health care costs, and an expansion of federal subsidies for health insurance would cause spending for some of the largest federal programs to increase relative to GDP.

CBO projects that if current laws remain unchanged generally, federal spending for Social Security and the government’s major health care programs — Medicare, Medicaid, the Children’s Health Insurance Program, and subsidies for health insurance purchased through the exchanges created under the Affordable Care Act — would rise sharply, to a total of 14 percent of GDP by 2039, twice the 7 percent average seen over the past 40 years.

If current laws remain generally unchanged in the future, CBO projects federal debt held by the public would decline slightly relative to GDP over the next few years. After that, however, the projected growing budget deficits would push debt above its current high level. CBO estimates in 2039 the federal debt held by the public would exceed 100 percent of GDP. In addition, the debt would be on an upward path relative to the size of the economy, a trend that could not be sustained indefinitely.

As it has in previous reports, CBO warns that putting the federal budget on a sustainable path for the long term will require lawmakers to make significant changes to tax and spending policies: reducing spending for large benefit programs below the projected levels, letting revenues rise more than they would under current law, or adopting some combination of those approaches.


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


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