Economy & Budget

CBO: The End is Near-ish

A new report from the Congressional Budget Office states that without reform of Social Security and Medicare, public debt will reach 109 percent of the economy by 2026 and nearly twice the size of the nation’s entire economy by 2037. I’m skeptical of CBO projections one year out — much less 20 or 30 years — but the trajectory is daunting.

Note: there is no data from the year 2043 through 2087 (the CBO’s forecasting range) because the “CBO does not report debt of more than 250 percent of GDP or projections based on debt above that level, such as interest outlays.” As Yuval Levin notes: “That’s because the models the agency uses show the economy essentially shutting down at those levels of debt, and make it impossible to project the usual figures.”

From the report:

The projections discussed above understate the severity of the long-term budget problem under the extended alternative fiscal scenario because they do not incorporate the negative effects that additional federal debt would have on the economy. In particular, large budget deficits and growing debt would reduce national saving, leading to higher interest rates, more borrowing from abroad, and less domestic investment—which in turn would lower the growth of incomes in the United States.

Remember that next time an ideologue like David Frum or Paul Krugman tells you not to worry about spending or debt.

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