Dismal Budget Outlook Calls for Urgent Action
WASHINGTON , March 20, 2024 /PRNewswire/ -- The Concord Coalition said today that the Long-Term Budget Outlook for 2034-2054, released by the Congressional Budget Office (CBO), is a grim reminder that political leaders have utterly failed to deal with known imbalances in the federal budget. Under current law, CBO projects that the debt to GDP ratio will spike over the next 30 years, from 99 percent this year to 166 percent of GDP in 2054, and the burden of net interest will balloon from 3.1 percent to 6.3 percent of GDP. Both numbers would far surpass previous highs.
"The unsustainable path we're on did not happen by accident. We have increased spending, cut taxes, and burdened the future with an unprecedented level of debt. There is no telling how long this irresponsible experiment in wishful thinking can last, but every year we delay action will make the reckoning all the more painful," said Concord Coalition executive director Bob Bixby.
The main factors contributing to CBO's dire outlook are well known: population aging, rising healthcare costs, slowing workforce growth, and spiraling interest on the debt.
The share of the population aged 65 and older will grow from 17.8 percent this year to 22.3 percent in 2054. This translates into higher spending for Social Security and the major healthcare programs (primarily Medicare and Medicaid). As a share of federal spending excluding interest these programs would grow from 54 percent this year to 68 percent in 2054 under current law.
Healthcare spending is projected to continue growing faster than the economy. This adds to the cost growth caused by population aging. Over the next 30 years, CBO projects that spending on the major health care programs would grow from 5.6 percent of the gross domestic product (GDP) to 8.3 percent under current law. About one-third of that increase is attributable to population aging, while the remaining two-thirds comes from rising costs per beneficiary.
Labor force growth, a key component of economic growth, is projected to slow by about three-quarters from the recent historical average. This is driven by population aging and low fertility rates. Policymakers cannot count on economic growth alone to close the expanding budget gap.
The constant accumulation of massive new debt on an annual basis combined with higher interest rates would lead to record levels of interest payments on the debt. In CBO's projections, interest costs rise from 3.1 percent of GDP this year to 6.3 percent of GDP in 2054, a level that CBO says would be "more than twice the largest percentage of GDP observed since at least 1940." CBO notes that net interest expenses in the extended baseline would exceed all discretionary spending by 2044–and exceed all Social Security spending by 2051.
"Democrats and Republicans have differences on the best way to deal with these problems. That's understandable. What's not understandable, and is in fact unacceptable, is their willingness to stand on the sidelines hoping that when things go wrong the other side will get the blame. People on the campaign trail this fall should acknowledge the fiscal challenge and give voters a clear sense of what they propose to do about it because an agenda premised on ever-rising debt is not a solid foundation for a sustainable budget or a growing economy," Bixby said.
The Concord Coalition is a nonpartisan, grassroots organization dedicated to fiscal responsibility. Since 1992, Concord has worked to educate the public about the causes and consequences of the federal deficit and debt, and to develop realistic solutions for sustainable budgets. For more fiscal news and analysis, visit concordcoalition.org and follow us on Facebook @ConcordCoalition and on Twitter/X: @ConcordC
SOURCE Concord Coalition
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