Buck down folks, the news isn’t good. New numbers released by the Congressional Budget Office (CBO) yesterday show the federal deficit jumped 35% this year and is set to almost triple in the next ten years. To make matters worse, the CBO now projects significantly slower economic growth over the next ten years. And we are still waiting for either presidential candidate to notice.
Here is an analysis of the data from the Committee for a Responsible Federal Budget:
Budget deficits are on the rise, according to the Congressional Budget Office’s (CBO’s) budget and economic projections released (yesterday). CBO projects that this year’s deficit will total $590 billion — roughly 35 percent higher than last year’s deficit of $438 billion — and trillion-dollar deficits will return by 2024 under current law. CBO also found the following:
- Deficits will grow dramatically over the next decade, rising from $590 billion, or 3.2 percent of Gross Domestic Product (GDP), in 2016 to $1.2 trillion, or 4.6 percent of GDP, in 2026.
- Debt held by the public will grow by over $9 trillion between now and 2026, from over $14 trillion today to $23.1 trillion by 2026. As a share of GDP, debt will rise from its post-World War II era high of 77 percent in 2016 to nearly 86 percent by 2026.
- Spending will grow from 21.1 percent of GDP in 2016 to 23.1 percent in 2026, while revenues will rise from 17.8 percent in 2016 to 18.5 percent by 2026.
- Of the nearly $2.4 trillion of nominal spending growth between 2016 and 2026, 82 percent will come from Social Security, health care, and interest on the debt. Those three budgetary categories will rise in cost from $2.2 trillion (11.8 percent of GDP) in 2016 to $4.1 trillion (15.3 percent of GDP) in 2026.
- CBO’s debt-to-GDP projections are similar to those made in March. While CBO projects $555 billion less in nominal debt by 2026 as a result of lower projected interest rates, this is offset by a projected $633 billion lower GDP estimate.
Perhaps most troubling about the new deficit numbers is that neither Donald Trump or Hillary Clinton have a plan to address the problem.
CBO’s latest projections clearly show that deficits are no longer declining and that the nation’s fiscal outlook remains bleak and unsustainable. As CBO explains, “Such high and rising debt would have serious negative consequences for the budget and the nation.” Given these projections, it is particularly discouraging that neither presidential candidate has a serious proposal to slow the growth in the debt (with Donald Trump set to dramatically increase it) and that outside commentators have been calling on policymakers to add more borrowing to an already large and growing debt burden.
The CBO also revised down both their short-term and long-term economic growth projections.
CBO’s newest baseline includes an update of its economic projections, which were last made in its January report. Since January, near-term economic growth has slowed, as has CBO’s outlook for projected growth in productivity and labor force participation.
As a result of these and other factors, CBO has revised down projections for GDP growth. For calendar year 2016, CBO estimates growth of 1.9 percent as opposed to the 2.5 percent it previously expected. Unfortunately, CBO now expects slightly slower growth than it projected in January. Over the decade, CBO now projects average real annual growth of 2.0 instead of 2.1 percent. As a result, CBO projects real GDP in 2026 will be 1.6 percent lower than it previously estimated, and nominal GDP will be 2.3 percent lower.