The Congressional Budget and Impoundment Control Act of 1974 (Budget Act) requires that the Congressional Budget Office (CBO) provide the House and Senate Budget committees with budget and economic projections for the federal government. Formally titled the Budget and Economic Outlook but commonly referred to as the “baseline,” CBO publishes and updates this report throughout the year. The baseline includes a 10-year projection of federal spending, revenue, deficits, and debt assuming current laws and policies generally remain unchanged.
This summer, CBO released the updated baseline in two parts: In July, CBO released the economic outlook portion of the baseline and, yesterday, the agency released the latest budget projections. The updated budget outlook is based on July’s economic projections and will incorporate legislation enacted through August 4th, including the four coronavirus relief bills.
What are the updated baseline’s key conclusions?
CBO’s projections are distressing. The deficit for fiscal year (FY) 2020 is projected to be $3.3 trillion, more than triple the previous year’s deficit and by far the highest in American history. From FY 2021-2030, annual deficits are expected to exceed one trillion dollars in every year and total $13.0 trillion over the period. The public debt is projected to be larger than the size of the entire economy by FY 2021—104 percent of gross domestic product (GDP)—and will continue to increase to more than $33 trillion by FY 2030 (109 percent of GDP). According to CBO, federal spending will consume an elevated share of total economic resources, exceeding the 50-year average (20.4 percent of GDP) in every year of the CBO baseline. Moreover, mandatory spending, including spending on interest payments on the federal debt, is expected to account for 75 percent of total federal spending by 2030, squeezing out spending for important discretionary priorities.
The baseline also projects significant revenue growth over the 10-year budget window. Federal revenues are estimated to grow from $3.3 trillion in 2020 to $5.5 trillion in 2030. Out-of-control mandatory spending—not revenue—clearly continues to be the biggest fiscal challenge the nation faces.
How should Congress respond to the ominous fiscal outlook?
While the primary job of lawmakers should be to first defeat the pandemic, policies to do so should not be constructed without consideration of the nation’s dire fiscal state. Further, CBO’s projections demonstrate the need for Congress to practice fiscal responsibility during normal times, in order to have flexibility to address unforeseen emergencies such as COVID-19 without spiraling our nation toward a fiscal crisis. Finally, it is critical—now more than ever—for Congress to pass a budget resolution that outlines a long-term, fiscally sustainable path. The Democrat Majority has neglected to do a budget resolution for the past two years. CBO’s projections illustrate the necessity for the Democrat Majority to do their job: write and pass a budget resolution that provides a responsible fiscal framework to correct the current trajectory.