When the financial crisis began at the end of 2007, it soon became clear that the government would need to run higher deficits in response. Tax revenue fell, spending on "automatic stabilizers" rose, and policymakers enacted new spending to stimulate the economy. At that time, the debt level was lower and in line with historical averages, giving lawmakers the room to borrow what they needed to adequately respond.
As we've said before, while the new budget projections from the CBO are an encouraging sign, it is easy to be overly optimistic about what the revisions mean for our fiscal outlook. While short-term deficits are falling, the long-term path is worrisome and insufficient progress has been made on that front.
As we have written before, the CBO recently released updated projections that show an improvement in the fiscal climate. Based on CRFB’s realistic baseline, the new data suggests that the debt will rise to 76 percent of GDP in 2023 as opposed to 79 percent.
The CBO has now spoken on how the President's budget would affect the fiscal outlook. Debt would fall to 70 percent of GDP by 2023, compared to 73 percent under current law and 76 percent under our latest iteration of the CRFB Realistic baseline (though we are still working on the precise number as we get new information).
Today, the Congressional Budget Office (CBO) released its analysis of President Obama’s FY 2014 budget request. CRFB has released a reaction to the score of the budget, praising the President for putting forward a deficit reduction offer that addresses the country's debt path, but warning that there would still need to be more done, particularly on entitlement spending.
Although it may be difficult to get an updated comprehensive score of the Affordable Care Act from CBO, CBO has updated its estimate of the coverage provisions of the Affordable Care Act with each new baseline. This baseline is no exception.
In February, we wrote the paper "Our Debt Problems Are Far From Solved," laying out the case for putting debt on a clear downward path as a percent of GDP with $2.4 trillion of additional savings. CBO's improved budget projections have prompted a new round of discussion of what should be the right direction for the budget.
Today, the Congressional Budget Office has released an update to its budget outlook from February. With little legislative changes since February, the budget outlook after a few technical revisions shows slightly lower debt levels compared to the previous baseline. However, debt remains on a clear, upward trajectory near the end of the decade, similar to the path in February's baseline.
A recent Washington Post article, “As Red Ink Recedes, Pressure Fades for a Budget Deal,” suggests that a fall in the short term deficits may diminish the motivation for a budget deal. But this misses the main concern of our fiscal outlook. While the short-term outlook has improved somewhat, long-term debt projections are still unsustainable.