The Congressional Budget Office projected that the federal budget deficit will grow “substantially” over the next few decades, thanks to rising spending on entitlement programs and interest on the federal debt.
Deficits are projected to increase to 4.5% of gross domestic product over the next decade, up from the current share of 4.2%, in the Congressional Budget Office’s latest long-term budget outlook released Tuesday. The Budget Office noted that level “has only been exceeded in only eight years since 1946.” All eight instances followed major recessions, with half occurring during the double-dip recession in the 1980s and the other half following the 2007-2009 recession.
“From 2019 to 2029, projected deficits average 4.3 percent of GDP — nearly one-and-a-half times the average over the past 50 years,” the nonpartisan congressional agency said. Deficits will grow to 8.6% of GDP over the next three decades, it said.
Federal discretionary spending is actually projected to decline over the next decade to 5% of gross domestic product, down from the current rate of 6.3%, mostly due to less spending for disaster relief. Federal revenue is also expected to rise, going to 18.3% of economic output over the next decade, up from 16.5% of gross domestic product. However, those increases in revenues will be outmatched by increases in mandatory spending, including entitlement programs such as Medicare and Social Security, which will rise to 14.9% of gross domestic product over the next decade, up from the current level of 12.7%.
The Congressional Budget Office predicts lower interest rates for 10-year Treasury notes, projecting an average of 1.6% over the next decade, down a tenth of a point from last year, and an average of 2.2% over the next three decades, down from last year’s projection of 2.4%. The office based the change on a “more comprehensive assessment” of how private investment affects interest rates.
Federal debt is nevertheless projected to equal 141% of output in 2048, an 11-percentage-point decline from last year’s projection.
