CBO Projects Unsustainable US Budget and Fiscal Outlook
Today, the Congressional Budget Office (CBO) released its latest projections for the federal budget and the U.S. economy, providing an in-depth look at the upcoming fiscal year. CBO now projects the federal budget deficit to reach $1.4 trillion in 2023 and $2.7 trillion in 2033, significantly higher than the historical average of 3.6 percent of gross domestic product (GDP). This new report also confirms that the Democrats’ so-called Inflation Reduction Act would in fact add to inflationary pressures over the next two years.
According to CBO's projections, annual budget deficits are estimated to average $2 trillion over the next decade, with debt held by the public rising from 98 percent of GDP in 2023 to 118 percent in 2033. This will be the highest level of debt ever recorded, surpassing the 106.1 percent record from 1946 following the end of World War II. Debt is also projected to continue to grow beyond 2033 if current laws remain unchanged, reaching 195 percent of GDP in 2053.
CBO also projects much weaker growth of real GDP for 2023 than it did last May, stronger growth during the 2024–2026 period, and similar rates of growth over the remainder of the projection period. Inflation is projected to be higher for 2023 and 2024, mainly because of persistent inflation across sectors of the economy, as well as supply-side disruptions. Interest rates are projected to be higher on average over the next five years than forecast last May.
The Concord Coalition, a bipartisan organization dedicated to fiscal responsibility, commented that CBO's new projections demonstrate that the expressed desire of many political leaders to reduce the budget deficit or even balance the budget is fundamentally at odds with their equally expressed desire to exempt popular programs from spending cuts or refuse to consider higher revenues.
Overall, CBO's new report provides an important update on the state of the US economy, budget, and fiscal outlook. It is clear that the US budget is on an unsustainable trajectory and that significant and sustained fiscal reforms are needed to put the nation on a prudent fiscal path.
0. “US yearly deficits projected to average $2 trillion over next decade: report” The Hill, 15 Feb. 2023, https://thehill.com/finance/3860026-us-yearly-deficits-projected-to-average-2-trillion-over-next-decade-report/
1. “Press Item | Press | Ranking Member's Newsroom | Ranking Member | U.S. Senate Committee On The Budget” Senate Budget Committee, 15 Feb. 2023, https://www.budget.senate.gov/ranking-member/newsroom/press/grassley-statement-and-fast-facts-on-budget-and-economic-outlook
2. “The Budget and Economic Outlook: 2023 to 2033” Congressional Budget Office, 15 Feb. 2023, https://www.cbo.gov/publication/58848
3. “Highlights of CBO's Update to the Budget and Economic Outlook for 2023–2033 – AAF” American Action Forum, 15 Feb. 2023, https://www.americanactionforum.org/insight/highlights-of-cbos-update-to-the-budget-and-economic-outlook-for-2023-2033/
4. “The Concord Coalition Says Latest 10-Year Projection from Congressional Budget Office Shows Federal Budget …” InvestorsObserver, 16 Feb. 2023, https://www.investorsobserver.com/news/qm-pr/5547196849977574
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