The Economy – In CBO’s economic forecast, which underlies its budget projections, the economy expands more slowly over the next decade than it did in 2018, averaging annual growth of 1.7 percent over the 2020– 2029 period. The slowdown begins in 2019 as the positive efects of recent tax legislation on business investment are expected to wane and federal purchases under current law are projected to drop sharply starting in the fourth quarter of the year. Over the longer term, growth is below its historical average, primarily because the labor force is expected to grow more slowly than it has in the past.
Federal debt is already large, and budget deficits over the next decade and beyond are projected to keep pushing it up in relation to the size of the economy. Eventually, debt as a share of economic output would reach its highest level in our nation’s history:
- At the end of 2018, the amount of debt held by the public was equal to 78 percent of gross domestic product (GDP).
- In CBO’s projections, debt equals 93 percent of GDP by 2029 and about 150 percent of GDP by 2049.
- Even at its highest point ever, just after World War II, debt was far less than that—106 percent of GDP.
Debt is on an unsustainable course in CBO’s projections. To put it on a sustainable one, lawmakers will have to make significant changes to tax and spending policies—making revenues larger than they would be under current law, making spending for large benefit programs smaller than it would be under current law, or adopting some combination of those approaches.