On Tuesday, the Congressional Budget Office (CBO) issued "The Budget and Economic Outlook: Fiscal Years 2013 to 2023," giving taxpayers an in-depth look at the economic situation our nation will most likely be facing over the next ten years. The report covers far more ground than I can go over in the space this blog affords me, but there are some noteworthy findings I thought were worth sharing.
- Federal debt will remain very high. CBO's forecast predicts that federal debt held by the public, as a percentage of GDP, will stay around 73 percent over the next five years- a historically high figure. For some context, the average debt/GDP percentage over the last four decades was nearly half that, at 39 percent. The federal deficit in 2013 is projected to slip below $1 trillion for the first time in five years -- down to $845 billion, assuming sequester cuts take effect in March. But CBO expects total debt to keep climbing, as deficits amount to $7 trillion over 2014-2023.
- The recovery hasn't arrived yet. CBO doesn't expect actual GDP to match potential GDP until 2017. In 2013, unemployment is expected to remain around 8 percent, and interest and inflation rates will likely remain extremely low. By 2014, CBO expects more substantial growth in GDP and a slight dip in unemployment rates, down to 7.6 percent. The projected annual average by 2019 is expected to be about 5.2 percent.
- Federal revenues and spending are both projected to increase. Recent changes in tax policy, as well as an expected growth in income from improving economic conditions, will mean more tax revenue for the federal government in coming years. However, federal outlays are expected to grow as well -- and remain higher than revenues for the foreseeable future. By 2023, federal outlays are expected to reach 23 percent of GDP (and on an upward trajectory), while revenues would remain around 19 percent of GDP.
When discussing CBO's projections, it's important to keep in mind that their baseline forecasts are made under the assumption that current law will remain in place over the next ten years. No forecast is perfect, but this gives budgetary analysts a benchmark against which we can compare how future cuts or spending increases would affect the budget relative to the path it's on now. The forecast could be significantly impacted depending on how Congress decides to act regarding:
- Sequester cuts set to take effect March 1st;
- The Continuing Resolution set to expire March 27th; and
- The statutory limit on federal debt, postponed from taking effect until May.
The Washington Post has a nice visual summary of some of the data from CBO's report, including a helpful graph comparing how health care spending and debt interest payments are expected to grow relative to programs like defense spending and Social Security.
Also, NTUF's own Demian Brady was featured on Townhall.com last month in a piece highlighting where Congress might begin trimming down the deficits CBO has projected. It features preliminary BillTally data from the 112th Congress.