Federal Budget Deficits Are Projected to Decline Through 2015 but Rise Thereafter, Further Boosting Federal Debt – CBO

Government 20 comments

2014

Ok, here are the facts on budget deficits. No doubt there will be spinning galore, but the bottom line is the deficit is going up and up. You may think this is good or bad or doesn’t matter, but as the CBO says, there are two ways to deal with it; cut benefits or raise taxes.

It must be really annoying to progressives when fiscal reality gets in the way of the ideal society.

Yes, government spending on health care programs is a major driver of growing deficits.

Yes, the deficit outlook has gotten worse since 2013

Projected Deficits Reflect Substantial Growth in the Cost of the Largest Benefit Programs

Projected deficits and debt for the coming decade reflect some of the long-term budgetary pressures facing the nation. The aging of the population, the rising costs of health care, and the expansion in federal subsidies for health insurance that is now under way will substantially boost federal spending on Social Security and the government’s major health care programs by 2 percentage points of GDP over the next 10 years (see the figure below). But the pressures of aging and the rising costs of health care will intensify during the next few decades.

Unless the laws governing those programs are changed—or the increased spending is accompanied by corresponding reductions in other spending relative to GDP, by sufficiently higher tax revenues, or by a combination of those changes—debt will rise sharply relative to GDP after 2024.. (For a more detailed discussion of the long-term budget situation, see CBO’s September 2013 report The 2013 Long-Term Budget Outlook.)

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CBO recently released The Budget and Economic Outlook: 2014 to 2024. In that report, CBO projects that if current laws remain in place, the federal budget deficit will total $514 billion in fiscal year 2014. That deficit will be $166 billion smaller than the figure posted in 2013 and down sharply from the shortfalls recorded between 2009 and 2012, which exceeded $1 trillion annually. At 3.0 percent of gross domestic product (GDP), this year’s deficit would be near the average experienced over the past 40 years and about 7 percentage points lower than the figure recorded in 2009.

Today’s post summarizes CBO’s assessment of the budget outlook over the next decade. Three more posts—to appear over the next several days—will provide more detail about the outlook for spending, revenues, and the economy. One more post will expand upon CBO’s economic forecast, explaining the reasons behind the slow recovery of the labor market.

Under Current Law, Federal Debt Will Grow to 79 Percent of GDP at the End of 2024, CBO Estimates

CBO constructs it baseline projections of federal revenues and spending over the coming decade under the assumption that current laws generally remain unchanged. Under that assumption, revenues are projected to grow by about 1 percentage point of GDP over the next 10 years—from 17.5 percent in 2014 to 18.4 percent in 2024. But outlays are projected to rise twice as much, from 20.5 percent of GDP in 2014 to 22.4 percent in 2024. The increase in outlays reflects substantial growth in the cost of the largest benefit programs—Social Security, Medicare, and Medicaid—and in payments of interest on the government’s debt; those increases would more than offset a significant decline in discretionary spending relative to the size of the economy.

Although the deficit in CBO’s baseline projections continues to decline as a percentage of GDP in 2015, to 2.6 percent, it then starts to increase again in 2016, reaching 4.0 percent of GDP in 2024. That figure for the end of the 10-year projection period is roughly 1 percentage point above the average deficit over the past 40 years relative to the size of the economy.

That pattern of lower deficits initially, followed by higher deficits for the remainder of the projection period, would cause debt held by the public to follow a similar trajectory (see the figure below). Relative to the nation’s output, debt held by the public is projected to decline from 74 percent of GDP in 2014 to 72 percent of GDP in 2017, but to rise thereafter, to 79 percent of GDP at the end of 2024. (As recently as the end of 2007, debt held by the public was equal to 35 percent of GDP.

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via Federal Budget Deficits Are Projected to Decline Through 2015 but Rise Thereafter, Further Boosting Federal Debt – CBO.

20 comments

  2. You really make it seem so easy with your presentation but I find this matter to be actually
    something which I think I would never understand.
    It seems too complex and very broad for me. I am looking forward for your next post, I
    will try to get the hang of it!

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  5. That is a really good tip especially to those fresh to the blogosphere.
    Brief but very precise information… Thanks for
    sharing this one. A must read post!

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  7. Here are all of the facts, Mr. Quinn, which belie ALL of the falsehoods that the Tea Party radicals spew out of their mouths whenever there is a microphone in front of them:
    I’m talking about plagiarist Rand Paul, Canadian born liar Ted Cruz, Lyan Paul Ryan of Wisconsin, accused felon Scott Walker of Wisconsin, political animal Chris Christi and cowardly John Boehner. (Just to name a few)
    https://www.google.com/search?q=federal+deficit+chart+by+president&tbm=isch&tbo=u&source=univ&sa=X&ei=c6IGU8XsH4edkQe6iICoDA&sqi=2&ved=0CDEQsAQ&biw=1024&bih=599#imgdii=_
    Let your readers observe and learn the facts.

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    1. I’m not sure of your point. In the material you reference it says this.

      “Over the past 50 years, 10 U.S. presidents have made annual budget requests to Congress, projecting deficits both big and small. But no other president compares to Barack Obama when it comes to the size and scale of the current budget deficit facing the United States.
      The country is facing an 8.3 percent estimated average national deficit of a two-term Obama administration — the biggest of the past 50 years. By comparison, the current estimate for Obama is nearly double the percentage under Presidents Ronald Reagan and George H.W. Bush — and they were fighting the Cold War.”

      Is that supposed to be good? Are you not concerned about the CBO projections? The facts to be concerned with now are what the CBO projects now.

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      2. Still don’t get the point. Are you just trying to find who to blame or are you at all concerned about the CBO projections for the next 10 years?

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      3. Everyone with a brain knows that two Bush administrations starting two wars in Iraq and one war in Afghanistan on our credit card combined with Wall Street deregulations created the economic mess that President Obama inherited.
        Your “facts” are sadly flawed and incorrect. End of discussion.

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      5. OK, Mr. Quinn, once again, here is exactly what we should be worried about and have time to fix:
        The Koch brothers, with their friends and associates, spent $407 million dollars in the 2012 election trying to defeat President Obama and attempting to buy Congress. They epitomize “the 1%”. “The 1%” succeeded in maintaining a Republican House majority, but failed in their bid to own the Senate and failed to defeat Obama. The Koch brothers, by the way, continue to receive “big oil subsidies” because the right-wing congress members that they bought and paid for will not support changing those tax loopholes.
        As we speak, the Koch brothers and their cronies are meeting and planning in Arizona how to spend many more millions during the 2014 mid-term elections in an attempt to buy the Senate and retain the House.
        The candidates supported by millions of campaign dollars from “the 1%”, if elected, are pledged not to support raising the minimum wage and will introduce bills to eliminate the minimum wage entirely. This damages our struggling economy, keeps many of “the 99%” downtrodden and reliant upon “welfare” to survive. That, in turn, hinders our economic recovery increases our national debt and renders our nation vulnerable to the more clever nations in the rest of the world. The national debt is increased because these bought and paid for members of Congress will not support tax reform to require “the 1%” to pay income taxes on the profits of greed stashed in off shore banks that they enjoy by utilizing the infrastructure that legitimate tax-paying citizens have paid for.
        The candidates supported by millions of campaign dollars from “the 1%”, if elected, are pledged to vote to eliminate food stamps, head start, meals on wheels, et al. This damages our struggling economy, keeps many of “the 99%” demoralized and dependent upon what “welfare” does remain, to survive. That, in turn, hinders our economic recovery, demoralizes many of our struggling citizens and renders our nation vulnerable to the more benevolent societies in the rest of the world.
        The candidates supported by millions of campaign dollars from “the 1%”, if elected, are pledged to vote to eliminate unemployment benefits for those of our citizens who are the victims of the inhumane corporate greed which sent their jobs offshore. That, in turn, increases the need for welfare assistance for their very survival. All of which weakens our economic recovery, creates opportunities for Tea Party Republicans to declare Obama to be “the food stamp president” and again undermines our economic recovery so that they can run against an economy struggling to recover in November of 2014. What a concept. Fuck things up totally through obstructionism and then blame Obama in November.
        The candidates supported by millions of campaign dollars from “the 1%”, if elected, at both state and national levels, are pledged to vote to suppress voting rights for any person of color who is likely to vote Democratic and to vote to deny any chance of citizenship for any immigrant who is likely to vote democratic. The minority right wing can no longer win elections so they are resorting to rigging elections. These actions destroy our precious democracy by oppressing the majority of our citizens and telling them that, if they are not wealthy and white, they do not matter. If that is not “relevance to the rest of us”, then tell me what is?
        The candidates supported by millions of campaign dollars from “the 1%”, if elected, at both state and national levels, are pledged to vote to crush the power and membership of labor unions. History clearly shows that the income and improving life styles of “the 99%” perfectly correlates with the power and strength of labor unions. An economically enhanced middle class creates more customers for the greedy 1%. However, they don’t mind grinding our workers into exploited servitude because there are so many needy and starving people elsewhere in the world to feed their corporate off shore tax exempt coffers and their blind inhumane greed. This is relevant to the rest of us because it is destroying our once great nation that our president is trying to preserve.
        These subjugated workers in America will not complain about working conditions, they will not speak out for a living wage nor will they attempt to unionize because they are petrified of losing their jobs.
        As in the 300,000 citizens of West Virginia who are afraid to complain about their drinking water having been polluted by big business for fear of losing their jobs.
        The candidates supported by millions of campaign dollars from “the 1%”, if elected, are pledged to returning “the 99%” to an existence of feudal serfdom after adopting the Trans Pacific Partnership which will send even more American jobs off shore to countries such as Vietnam, where the minimum wage is 28 cents per hour, and there are no child labor laws or environmental regulations.
        I don’t want to tear down any part of our society. I want a “level playing field”. “The 1%” should not be able to buy our government, as they now can. They own the House and are now spending millions more to buy the Senate. House obstructionism has crippled our nation for four years. We can boast of 48 consecutive months of private sector job growth under Obama in spite of Republican obstructionism, but just imagine how much better it could now be with patriotic support from the right wing rather than greed and divisiveness.

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      8. Thank you so much for proving my point. Where are the Koch brothers listed herein? The secretive Citizens United supported by a Bush conservative Supreme Court must be over turned and destroyed before our Democracy is destroyed!

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      9. I looked the Koch’s up and all their causes. As you said they are off the right wall, but have you seen and actual impact of their actions? I recall no serious legislation supporting their goals and certainly none that has gone anywhere or have a chance to.

        Dick

        Richard D Quinn Quinnscommentary.com

        >

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      10. The Koch’s are buying elections at both state and national levels. They bought the House in 2012 and are now attempting to buy the Senate.

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      11. Ok, and what new legislation has that gotten them or they have blocked? Are they different from Soros except in their point of view. This is why we need term limits.

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      12. The Tea Party dominated House that the Koch’s bought has blocked everything that President Obama has attempted to do since the 2012 election. Aren’t you watching the news? They cannot get their legislative agenda passed because the Democrats have a majority in the Senate and POTUS would veto their “make the rich richer” bills anyway.

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