BPC's Hoagland on CBO Projections: Federal Debt May Eclipse Economy Within Decade

Washington, D.C.– As the federal government hurtles toward another fiscal cliff this fall, new projections from the Congressional Budget Office (CBO) forecast the nation’s ominous debt trajectory.

The following is a statement from BPC Senior Vice President G. William Hoagland:

“CBO’s new projections are yet another reminder that the federal government is on an unsustainable fiscal path. By the end of CBO’s 30-year window, interest payments on the national debt are on track to consume roughly one-third of all federal tax revenue, nearly equivalent to all annually appropriated spending on defense and domestic priorities.

“The true picture may be even worse, because CBO is required to assume that policymakers will restrain discretionary spending to the sequester cap levels or pay for any increases above them (an unlikely scenario) and allow much of the 2017 tax cuts to expire in 2025.

“Using more realistic assumptions, CBO projects that debt held by the public is on course for uncharted waters, eclipsing the size of the economy within a decade and exceeding twice the size of our economy by 2047. That would be historically unprecedented.

“These latest projections are daunting but not at all surprising. CBO’s long-term budget outlooks have painted a dark picture of the nation’s fiscal path every year for the past decade. Nevertheless, policymakers continue to ignore the problem and the hard choices necessary to cope with this situation, even in the face of potential bipartisan solutions.

“The near-term picture is also troubling. We’re heading toward a fiscal cliff this fall as the government careens toward the debt limit “X Date” in October or early November and the discretionary spending caps threaten to bring massive cuts to defense and domestic spending.

“But don’t be fooled. As CBO’s projections show yet again, this year’s upcoming budget fight is merely one battle in the long fiscal war ahead.

“Policymakers must face up to these issues soon, or we’ll all pay the price.”