CBO now projects the 2011 deficit to reach a record-breaking $1.5 trillion, and increased its deficit projections over the 2011-2020 period by $1.4 trillion. The 2010 tax cut package and a weakening of economic forecasts account for most of the deterioration in budget projections. CBO's baseline makes it all the more imperative to enact a fiscal plan now to deal with our mounting federal debt.
While CBO's debt projections have improved under the Extended-Baseline scenario, debt has worsened under the Alternative Fiscal Scenario. But under either path, debt reaches unsustainable levels. CRFB argues that policymakers should act immediately to put in place a credible plan to stabilize the debt gradually as the economy recovers.
In its Analysis of the President's Budget, CBO estimates that the FY 2011 budget proposals would cause public debt levels to rise to 90 percent of GDP, above the 68 percent projected in CBO's baseline. It is clear that the President's Budget continues to place the country on an unsustainable fiscal path. The Administration must address the issue of excessive borrowing in the event that the fiscal commission does not get the country back on sustainable fiscal footing.
From CBO's January 2010 Budget and Economic Outlook, baseline estimates now show that public debt will increase from 53 percent of GDP in 2009 to 67 percent in 2020. Yet as troubling as this scenario is, it is almost certainly optimistic. If we assumed current policies were to continue as they have in the past, the debt would reach nearly 100 percent of GDP in 2020.