CBO’s Long Term Budget Outlook, released today (see our press release here), paints a more alarming picture of the U.S. debt path than had been previously expected. Under its extended-baseline scenario—assuming the closest approximation of current law to continue in the future—CBO’s 2009 Outlook predicted that our debt held by the public would hit 56 percent of GDP in 2020, and would skyrocket to 128 percent by 2050. Its 2010 revised baseline scenario shows debt-to-GDP at 66 percent by 2020—surpassing the commonly-considered 60 percent sustainable debt level—and reaching 90 percent by 2050.
Yet even more alarming are the numbers predicted under CBO’s alternative fiscal scenario, which is generally considered to be a more likely picture of our future fiscal path, and includes the extension of various tax provisions and other programs set to expire soon. The 2009 Outlook predicted that our debt held by the public would hit 87 percent of GDP by 2020 under these projections, and would more than triple to a whopping 321 percent by 2050—far, far beyond any common benchmark of sustainability. But 2010’s outlook seems even worse: we are now expected to hit the 100 percent of GDP mark by 2023, only a little over a decade from now, and in 2050, our public debt will be almost 350 percent of GDP. In 2084, CBO projects our debt to reach an unfathomable 947 percent.
CBO’s report reflects the importance of acting soon to change the prospects for our fiscal future. With these projected numbers rising year after year while we stay on our current fiscal path, it is clear that we should expect the debt to rise exponentially in the coming decades as well. Unless something is done soon to adjust our growing deficit, it will reach critical and unmanageable levels. It will become harder year after year to return to a sustainable path, and it is thus critical to act now.
Watch for CRFB’s more detailed analysis of CBO’s report soon.