Friday, April 21, 2017

CBO Long Term Budget Outlook

This report does not use the word "unsustainable", which previous reports did.  I found this interesting quote:
 CBO also assessed the effects of larger budget deficits so that cumulative deficits (excluding interest payments and macroeconomic feedback) would be $2 trillion or $4 trillion greater through 2027 than they would be under the extended baseline. On those paths—after accounting for the economic effects of the increase in debt—federal debt would be substantially higher than CBO projects in the extended baseline. For the +$2 trillion path, federal debt would equal 202 percent of GDP in 2047; the +$4 trillion path would result in federal debt exceeding 250 percent of GDP in that year.

By 2047, net interest costs would be 6.2 percent of GDP, raising total federal spending to more than 29 percent of GDP.

Either the $2 trillion or $4 trillion path would be a big problem.  That sounds like a lot of money, but over ten years, it is only $200 or $400 billion per year.  A recession, which almost certainly will start next year, will cause a huge increase in spending, and put us on that $4 trillion path.

There is also a discussion in that report on what would happen if Social Security benefits were paid from the general revenues.

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