Congressional Budget Office Director Keith Hall (shown above right) warned of unsustainable debt and other issues on Monday while highlighting a newly released economic forecast.
The Congressional Budget Office (CBO) released its annual economic outlook for the next decade earlier in the morning.
The report estimates such economic factors as federal deficits, debt, revenues and spending based on current laws.
Hall focused on the debt and the problems it could cause if they’re not addressed during a press conference in Washington, D.C.
“I would like to draw your attention to important information in the report about the amount of debt the federal government will incur if we continue on the current budgetary path,” Hall said.
“I will focus on four questions in my remarks: how large the CBO projects that debt will [become], why is debt projected to become so large, what would happen if the economy grew more quickly, and what are the consequences of high and rising debt.”
President Donald Trump made increased economic growth one of his main priorities for his time in the White House. The economy has shown notable signs of improvement, as his agenda has focused on tax reform and deregulation.
The Tax Cuts and Jobs Act cut taxes for many families and businesses. But debt remains a problem that could hinder the economy going forward.
The amount of debt held by the public was equal to 78 percent of gross domestic product by the end of 2018. The CBO report found that because of persistently large deficits, federal debt held by the public is projected to grow steadily before reaching 93 percent of GDP in 2029.
“Federal debt is already large and budget deficits over the next decade and beyond are projected to keep pushing up in relation to the size of the economy,” Hall said. “Eventually debt as a share of economic output would reach its highest level in our nation’s history.”
The CBO report also found the debt is then projected to continue growing toward a record 150 percent of GDP in 2049.
Its previous highest point was 106 percent, just after World War II. Hall also expressed concern over the findings that the gap between government revenue and spending will persist despite growth in both cases.
“This year we have summarized our findings in a new way. We used some charts to illustrate key messages,” Hall said. “This figure clearly shows federal spending and revenues both grow over the next 10 years yet the gap between them persists at that time.”
The CBO report found that spending was primarily driven by the benefits for older Americans and interest costs. That includes outlays for Social Security and Medicare, which increase significantly in the baseline projections.
This is partially due to a large segment of retiring baby boomers. Interest costs are also projected to rise primarily because of increases in federal borrowing and higher interest rates.
“CBO’s projection of the average deficit equals 4.4 percent of GDP,” Hall said. “This is one of our more sobering pictures. That average deficit is not only large but also unusual for times of low unemployment in contrast to times of high unemployment when the government sometimes implements policies aiming to stabilize the economy, causing deficits to be larger.”
Hall added there is a chance the economy could grow more quickly, which would make the deficit smaller. But that outcome is unlikely, unless there are notable legislative changes with this year already expected to see a slowdown in economic growth as the benefits of the tax cuts start to settle out.
Still, there is a lot of change that could happen during that period — and it often does.
“I will emphasize that debt is on an unsustainable course in CBO’s projections,” Hall said. “To put it on a sustainable one, lawmakers will have to make significant changes to tax and spending policies: making revenues larger than they would be under current law, making spending for large benefit programs smaller than it would be under current law, or docking some combination of those approaches.”
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