Report June 28, 2023:
Introduction:
The U.S. faces a challenging fiscal outlook in the coming years, according to CBO’s projections. Measured as a percentage of GDP, large and sustained deficits lead to high and rising federal debt that exceeds any previously recorded level.
Summary:
Each year, the Congressional Budget Office publishes a report presenting its projections of what the federal budget and the economy would look like over the next 30 years if current laws generally remained unchanged. The long-term budget projections typically follow CBO’s 10-year baseline budget projections and then extend most of the concepts underlying them for an additional 20 years. This year, the long-term projections are based on CBO’s May 2023 baseline projections but also reflect the estimated budgetary effects of the Fiscal Responsibility Act of 2023 (Public Law 118-5), which was enacted on June 3, 2023.
Deficits
In CBO’s projections, the deficit equals 5.8 percent of gross domestic product (GDP) in 2023, declines to 5.0 percent by 2027, and then grows in every year, reaching 10.0 percent of GDP in 2053. Over the past century, that level has been exceeded only during World War II and the coronavirus pandemic. The increase in the total deficit results from faster growth in spending than in revenues. The primary deficit, which excludes interest costs, equals 3.3 percent of GDP in both 2023 and 2053, but the total deficit is boosted by rising interest costs.
Debt
By the end of 2023, federal debt held by the public equals 98 percent of GDP. Debt then rises in relation to GDP: It surpasses its historical high in 2029, when it reaches 107 percent of GDP, and climbs to 181 percent of GDP by 2053. Such high and rising debt would slow economic growth, push up interest payments to foreign holders of U.S. debt, and pose significant risks to the fiscal and economic outlook; it could also cause lawmakers to feel more constrained in their policy choices.
Spending
In 2023, outlays fall to 24.2 percent of GDP as federal spending in response to the pandemic diminishes. Outlays continue to decline through 2026 but increase thereafter, reaching 29.1 percent of GDP in 2053. (By comparison, from 1993 to 2022, outlays averaged 21.0 percent of GDP.) Rising interest rates and persistently large primary deficits cause interest costs to almost triple in relation to GDP between 2023 and 2053. Spending on the major health care programs and Social Security—driven by the aging of the population and growing health care costs—also boosts federal outlays significantly over the next 30 years.
Revenues
Revenues fall to 18.4 percent of GDP in 2023 and continue to drop until 2026, when the scheduled expiration of certain provisions of the 2017 tax act causes tax receipts to increase. Revenues generally rise thereafter, reaching 19.1 percent of GDP in 2053, as an increasing share of income is pushed into higher tax brackets. (By comparison, from 1993 to 2022, revenues averaged 17.2 percent of GDP.)
Changes From Previous Projections
Measured as a percentage of GDP, federal debt is now projected to be 2 percentage points higher in 2023 and 9 percentage points lower in 2052 than it was in last year’s report. Overall, CBO’s projections of debt have increased through 2042 and decreased in later years.