Contribute
CONNECT:

research

An “Unsustainable” Future

- January 26, 2015

CBO Forecasts Mounting Deficits And Debt, Slower Economic Growth, And Increased Costs From ObamaCare

WITHIN 25 YEARS, THE CBO EXPECTS DEBT TO EXCEED GDP AND CONTINUE TO GROW, AN "UNSUSTAINABLE" TREND

Within 25 Years The CBO Expects Debt Held By The Public To Exceed GDP And "Would Continue On An Upward Trajectory Thereafter." "When CBO last issued long-term budget projections (in July 2014), it projected that, under current law, debt would exceed 100 percent of GDP 25 years from now and would continue on an upward trajectory thereafter-a trend that could not be sustained." ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

  • By 2039, Debts Will Still Be Growing Relative To The Economy, "A Trend That Would Ultimately Be Unsustainable." " Moreover, debt would still be on an upward path relative to the size of the economy in 2039, a trend that would ultimately be unsustainable." ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)
  • The Debt's Continued Growth "Would Have Serious Negative Consequences" By "Restraining Economic Growth In The Long Term" And "Heightening The Risk Of A Fiscal Crisis. " "Such large and growing federal debt would have serious negative consequences, including increasing federal spending for interest payments; restraining economic growth in the long term; giving policymakers less flexibility to respond to unexpected challenges; and eventually heightening the risk of a fiscal crisis." ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

The Total Federal Debt Is Expected To Total $27.3 Trillion By The End Of 2025. "In CBO's projections, debt held by the public is expected to increase by $8.8 trillion between the end of 2014 and the end of 2025, and debt held by government accounts is estimated to rise by $0.7 trillion. As a result, gross federal debt is projected to rise by $9.5 trillion over that period and to total $27.3 trillion at the end of 2025. About one-fifth of that sum would be debt held by government accounts" ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

  • By The End Of Obama's Term In Office, The Total Federal Debt Is Projected To Reach More Than $19 Trillion. ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

At The End Of FY 2015, The CBO Estimates That The Debt Held By The Public As A Percentage Of The Economy Will Be Higher Than At Any Time Since 1950. "CBO expects that federal debt held by the public will amount to 74 percent of GDP at the end of this fiscal year-more than twice what it was at the end of 2007 and higher than in any year since 1950 (see Summary Figure 1)." ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

  • Debt Held By The Public Has More Than Doubled Since 2007, From 35 Percent Of GDP In 2007 To 74.1 Percent In 2014. "Although federal debt relative to the size of the economy is projected to increase only modestly over the next decade, it is already high by historical standards: As recently as the end of 2007, debt held by the public was equal to just 35 percent of GDP, but by 2012 it had ballooned to 70 percent of GDP." ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

Interest Payments On The Debt Are Expected To Cost Over $200 Billion Alone This Year And Over $700 Billion In The Next 10 Years. "The interest payments alone are expected to hit $227 billion this year, more than double to $480 billion by 2019 and more than triple to $722 billion by 2024." (Steven Mufson, "CBO: Interest On Federal Debt Will Triple Over Coming Decade ," The Washington Post's Wonkblog . 1/26/15)

By 2018, Deficits Are Projected To Rise Again, Climbing Back Over A Trillion Dollars In 2025

CBO Expects Deficits To Begin To Rise Again After 2018 "As Growth Slows And Health And Retirement Costs Rise." "But deficits are projected to resume their climb by 2018 as growth slows and health and retirement costs rise, the Congressional Budget Office said Monday." (Nick Timiraos, "Congressional Budget Office Sees Deficit Falling Slightly In 2015 And 2016," The Wall Street Journal , 1/26/15)

According To The CBO, Trillion-Dollar Deficits Are Projected To Return Within Ten Years, With A $1.1 Trillion Deficit Projected In 2025. "The deficit in 2025 is projected to be $1.1 trillion, or 4.0 percent of GDP, and cumulative deficits over the 2016-2025 period are projected to total $7.6 trillion." ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

  • Over The Next Ten Years, Total Deficits Will Amount To Over $7.6 Trillion. ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

The CBO Estimates That Spending On Social Security And Major Healthcare Programs, Including Subsidies Covered By ObamaCare's Insurance Exchanges, Will Grow Faster Than The Economy. "Consequently, under current law, spending will grow faster than the economy for Social Security; the major health care programs, including Medicare, Medicaid, and subsidies offered through insurance exchanges; and net interest costs." ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

  • As Spending On Entitlement Programs Accelerates, All Other Spending, Including On National Defense, Will Shrank To Historic Lows As A Share Of The Economy. "In contrast, mandatory spending other than that for Social Security and health care, as well as both defense and nondefense discretionary spending, will shrink relative to the size of the economy. By 2019, outlays in those three categories taken together will fall below the percentage of GDP they were from 1998 through 2001, when such spending was the lowest since at least 1940 (the earliest year for which comparable data have been reported)." ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

ECONOMIC GROWTH IS EXPECTED TO BE SLOWER THAN PREVIOUSLY ESTIMATED

The CBO Revised Down Their Expected Economic Growth From 2014 To 2018, Lowering Their Expectations For Real GDP By 1 Percent By 2024. "Last August, CBO projected real GDP growth averaging 2.7 percent per year for 2014 through 2018; CBO now anticipates that real GDP growth will average 2.5 percent annually over that period. The revision mainly reflects a reduction in CBO's estimate of potential output and therefore of the current amount of slack in the economy. On the basis of the current projection of potential output, CBO now forecasts that real GDP in 2024 will be roughly 1 percent lower than the level estimated in August." ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

  • The CBO Blames Lingering Effects Of The Recession For Its Lower Economic Growth Projections. "At the same, the agency revised down its estimates of potential output for the economy, citing the lingering effects of the recession and the slow recovery. That dropped its GDP growth forecast to 2.5% for the 2014-18 period, down 0.2 percentage points from its last estimate, published in August 2014. The downward revision to the economy's growth potential would reduce GDP in 2024 by a full percentage point." (Nick Timiraos, "Congressional Budget Office Sees Deficit Falling Slightly In 2015 And 2016," The Wall Street Journal , 1/26/15)

Economic Growth Is Expected To Remain Well Below Its Performance In The 1980s And 1990s As Growth In The Labor Force Is Held Down. "Potential output is expected to grow much more slowly than it did during the 1980s and 1990s primarily because the labor force is anticipated to expand more slowly than it did then. Growth in the potential labor force will be held down by the ongoing retirement of the baby boomers; by a relatively stable labor force participation rate among working-age women, after sharp increases from the 1960s to the mid-1990s; and by federal tax and spending policies set in current law." ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

Unemployment Won't Reach Its Natural Rate Until The Fourth Quarter Of 2017, Nearly A Year After Obama Has Left Office. "For the labor market in particular, CBO anticipates that slack will dissipate by the end of 2017. By CBO's projections, increased hiring will reduce the unemployment rate from 5.7 percent in the fourth quarter of 2014 to 5.3 percent in the fourth quarter of 2017, which is close to the expected natural rate of unemployment (that is, the rate arising from all sources except fluctuations in the overall demand for goods and services)." ("The Budget And Economic Outlook: 2015 To 2025," The Congressional Budget Office, 1/26/15)

  • Despite Labor Growth, The CBO Estimates "A Significant Amount Of Slack Remains." "Although conditions in the labor market improved notably in 2014, CBO estimates that a significant amount of slack remains." ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

CBO: "Continued Weak Growth In Hourly Rates Of Labor Compensation" Is A Major Indicator That A "Significant Slack Remains In The Labor Market. "Indicators of Labor Market Slack. Continued weak growth in hourly rates of labor compensation (that is, wages, salaries, and benefits) is an important signal that significant slack remains in the labor market. The reason is that when slack exists-that is, when labor resources are underused and many workers are unemployed or working fewer hours than they would like-firms can hire from a large pool of underemployed workers. Hence, the firms have a smaller incentive to increase compensation in order to attract workers." ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

CBO: OBAMACARE CONTINUES TO BE A DRAIN ON THE ECONOMY

$2 Trillion: Gross Cost Of ObamaCare's Coverage Provisions From 2016 To 2025. ("The Budget And Economic Outlook: 2015 To 2025," The Congressional Budget Office, 1/26/15)

  • FLASHBACK: $1.8 Trillion: Gross Cost Of ObamaCare's Coverage Provisions From 2015 To 2024. ("Updated Estimates Of The Effects Of The Insurance Coverage Provisions Of The Affordable Care Act," Congressional Budget Office, 4/14/14)

CBO: ObamaCare Will "Raise Effective Tax Rates On Earnings And Thus Reduce The Amount Of Labor That Some Workers Choose To Supply." "The ACA will also affect the labor market in coming years and therefore affect output. The largest impact of the ACA on the labor market, especially as slack diminishes, will be that some provisions of the act raise effective tax rates on earnings and thus reduce the amount of labor that some workers choose to supply." ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

  • CBO: ObamaCare Reduces Labor As The Law "Directly Imposes Higher Taxes On Labor Income Of The People." "That effect occurs partly because the health insurance subsidies that the act provides through the Medicaid expansion and the exchanges are phased out for people with higher income, creating an implicit tax on additional earnings by some people, and partly because the act directly imposes higher taxes on the labor income of other people." ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

CBO: "Certain Aspects Of" ObamaCare Will "Lower The Participation Rate In The Next Several Years." "The rate of labor force participation has dropped noticeably in recent years, and CBO expects the rate to continue to decline-by about one half of one percentage point (to 62.5 percent) by the end of 2017 and by an additional one-half of one percentage point (to 62 percent) by 2019. A number of factors will dampen participation. The most important is the ongoing movement of the baby-boom generation into retirement. Federal tax and spending policies-in particular, certain aspects of the ACA, and also the structure of the tax code, whereby rising income pushes some people into higher tax brackets-will also tend to lower the participation rate in the next several years." ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)

CBO: ObamaCare Will Lead To The "Permanent Withdrawal Of Some Workers From The Labor Force." "The remainder stems from the reduction in some people's incentive to work resulting from the ACA and the structure of the tax code and from the permanent withdrawal of some workers from the labor force in response to the recession and slow recovery." ("The Budget And Economic Outlook: 2015 To 2025," Congressional Budget Office, 1/26/15)


Previous post

A High-Flying History

Next post

Clinton Is All Over The Map On Iran Sanctions
Republican National Committee

Connect With Us

Republican National Committee
Chairwoman Ronna McDaniel
News & Videos
  • 310 First Street SE, Washington, DC 20003
  • 202-863-8500

By providing your phone number, you are consenting to receive calls and SMS/MMS msgs, including autodialed and automated calls and texts, to that number from the Republican National Committee. Msg&data rates may apply. Terms & conditions/privacy policy apply 80810-info.com.

Paid for by the Republican National Committee. Not Authorized By Any Candidate Or Candidate's Committee. www.gop.com

By providing your phone number, you are consenting to receive calls and SMS/MMS msgs, including autodialed and automated calls and texts, to that number from the Republican National Committee. Msg&data rates may apply. Terms & conditions/privacy policy apply 80810-info.com.

Paid for by the Republican National Committee.
Not Authorized By Any Candidate Or Candidate's Committee. www.gop.com