Today, the Congressional Budget Office (CBO) released The 2020 Long-Term Budget Outlook, commonly referred to as the extended baseline, which includes budget projections for the next 30 years. The extended baseline confirms that the nation faces a looming fiscal crisis due to incessant annual deficits and record-high debt levels.
What are the extended baseline’s key conclusions?
- Debt:The long-term outlook shows the public debt more than doubling from 79 percent of gross domestic product (GDP) in 2019 to 195 percent of GDP by 2050. This is significantly higher than any previous debt burden in American history. Mandatory spending (including interest payments on the debt) is the sole driver of this growing debt burden. As a percentage of GDP, discretionary spending is projected to decline and revenues to grow. Both of these changes significantly improve the budget outlook, but not by nearly enough to offset unsustainable mandatory spending.
- Mandatory Spending: Mandatory spending increases from 12.9 percent of GDP in 2019 to 17.5 percent of GDP in 2050.
- Discretionary Spending: Discretionary spending declines from 6.3 percent of GDP in 2019 to 5.6 percent of GDP by 2050.
- Net Interest: Net interest spending more than quadruples as a percentage of GDP over the next 30 years, increasing from 1.8 percent of GDP in 2019 to 8.1 percent of GDP in 2050. By 2043, CBO projects spending for interest payments on the national debt will exceed all discretionary spending.
- Revenues: Revenues increase from 16.3 percent of GDP in 2019 to 18.6 percent of GDP by 2050.
How should policymakers address the unsustainable long-term fiscal outlook? The first step is for the Budget Committee to write—and Congress to pass—a budget resolution that outlines a long-term, fiscally sustainable path. A budget resolution is the only legislative vehicle that deals with the government’s finances in a comprehensive manner and that can provide a clear vision of how to fix the federal government’s fiscal challenges.