CBO | The 2013 Long-Term Budget Outlook

2013

Some members of Congress think the deficit is no big deal, at least one frequently says Social Security has nothing to do with the deficit. Our attention is diverted from the reality of the situation by any number of things, especially the misleading rhetoric of our politicians.

The fact is we are on a troubling trajectory, an unsustainable path. There are a few ways out of this; trim spending, increase federal revenue or both … take your pick!

Between 2009 and 2012, the federal government recorded the largest budget deficits relative to the size of the economy since 1946, causing federal debt to soar. Federal debt held by the public is now about 73 percent of the economy’s annual output, or gross domestic product (GDP). That percentage is higher than at any point in U.S. history except a brief period around World War II, and it is twice the percentage at the end of 2007. If current laws generally remained in place, federal debt held by the public would decline slightly relative to GDP over the next several years, CBO projects.

After that, however, growing deficits would ultimately push debt back above its current high level. CBO projects that federal debt held by the public would reach 100 percent of GDP in 2038, 25 years from now, even without accounting for the harmful effects that growing debt would have on the economy. Moreover, debt would be on an upward path relative to the size of the economy, a trend that could not be sustained indefinitely.

The economy’s gradual recovery from the 2007–2009 recession, the waning budgetary effects of policies enacted in response to the weak economy, and other changes to tax and spending policies have caused the deficit to shrink this year to its smallest size since 2008: roughly 4 percent of GDP, compared with a peak of almost 10 percent in 2009. If current laws governing taxes and spending were generally unchanged—an assumption that underlies CBO’s 10-year baseline budget projections—the deficit would continue to drop over the next few years, falling to 2 percent of GDP by 2015. As a result, by 2018, federal debt held by the public would decline to 68 percent of GDP.

However, budget deficits would gradually rise again under current law, CBO projects, mainly because of increasing interest costs and growing spending for Social Security and the government’s major health care programs (Medicare, Medicaid, the Children’s Health Insurance Program, and subsidies to be provided through health insurance exchanges).


CBO expects interest rates to rebound in coming years from their current unusually low levels, sharply raising the government’s cost of borrowing. In addition, the pressures of an aging population, rising health care costs, and an expansion of federal subsidies for health insurance would cause spending for some of the largest federal programs to increase relative to GDP. By 2023, CBO projects, the budget deficit would grow to almost 3½ percent of GDP under current law, and federal debt held by the public would equal 71 percent of GDP and would be on an upward trajectory.

via CBO | The 2013 Long-Term Budget Outlook.

3 comments

  1. 1 min ago

    Duke taking away retiree’s coverage????

    These are just a couple of the “DIRTY 30” companies Obama was going to go after, as you can see DUKE ENERGY is one of them!!!!! PG&E Corp by Gary Rivlin, Josh Dzieza PG&E spent even more on lobbying than Verizon: $79 million over three years. It, too, got what it paid for: the company paid an effective tax rate of negative 21 percent on almost $5 billion in domestic profits, getting rebates and credits worth over $1 billion back in taxes. General Electric by Gary Rivlin, Josh Dzieza When it comes to dodging taxes, no company is more skilled than General Electric. As The New York Times reported last year, the company employees 975 tax experts, many of whom used to work for the IRS or the Treasury. From 2008 through 2010, it spent $84 million lobbying Congress. The money was well spent: despite making $10.5 billion in U.S. profits over the three years, GE paid no federal taxes and got $4.7 billion back in rebates. American Electric Power by Gary Rivlin, Josh Dzieza For American Electric Power, spending $28.8 million on lobbying was a worthwhile investment. It paid an effective tax rate of negative 9.2 percent on $5.9 billion in domestic profits. That’s essentially a subsidy of more than $2.6 billion. Duke Energy by Gary Rivlin, Josh Dzieza Duke supplemented its $5.4 billion in profits with $216 million in tax refunds. It spent $17.5 million on lobbying, and also made ample use of offshore tax shelters. The company has 27 subsidiaries in overseas tax havens.

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