The Congressional Budget Office (CBO) has released its 2016 LongTerm Budget Outlook, the annualreport that analyzes our nation’s longterm economic health. Not surprisingly, the report paints a bleak economic outlook, saying, “…federal debt as a share of GDP would reach unprecedented levels if current laws generally remain unchanged. Such high and rising debt would have serious consequences for the nation’s budget and economy.”
While these new projections are already dire, our analysis shows that CBO’s outlook seriously underestimates the growth of federal debt during the coming decades. This is because CBO debt calculations completely overlook the intragovernmental debt that is earmarked to pay for Social Security and Medicare. By ignoring these enormous government spending programs and their debt, CBO underestimates the rapid rate at which our nation is heading toward a debt crisis.
The problem is that CBO excludes projections for “gross debt” in the longterm report, even though that data is available in CBO’s 10-year budget projections.2 The debt CBO does calculate over the long-term, known as “public debt,” paints a rosier picture of our economic outlook than the more realistic measure of gross debt. This is important because a more accurate assessment of our nation’s fiscal outlook would inform both citizens and lawmakers about the need for swift action to reduce spending.
Using the economic data available from CBO’s long-term report and historical spending and debt information, Freedom Partners has developed a more realistic projection of our growing federal debt. Based on more accurate estimating techniques, we’ve determined that the gross federal debt will nearly double by 2030 (from $19.3 trillion to $37.8 trillion), reaching 116 percent of GDP.3 This projection is 23.5 percent higher than CBO predicts.