CBO’s Call to Action on Budget, Economy

• CBO reports deficits are projected to increase from 2017 to 2025, with the 2025 deficit reaching nearly $1.1 trillion.

• The national debt is projected to increase to $27.3 trillion by 2025. Interest on the debt will become the third largest federal expenditure in 2025, behind only Social Security and Medicare.

• Economic growth is expected to average a paltry 2.1 percent per year from 2018-2025. CBO states that Obamacare will harm economic growth.

Yesterday CBO released its new budget baseline, predicting a fiscal year 2015 deficit of $468 billion and a 2016 deficit of $467 billion. These are both down slightly from 2014’s deficit of $483 billion. Deficits begin to increase in 2017, eventually reaching $1.088 trillion in 2025.

CBO’s report shows that Washington’s debt will continue to spiral out of control, reaching $27.3 trillion in 2025. Interest on the national debt will increase from $227 billion in the current fiscal year to $827 billion in 2025. Interest costs would be the third single biggest line-item in the federal budget, just behind Social Security and Medicare. It will be more than the combined spending on exchange subsidies, veterans mandatory programs, unemployment compensation, the supplemental nutrition assistance program, federal civilian and military retirement, and disability insurance. The report underscores the need for measures to rein in our long-term budget problems.

President Obama has touted lower deficits, but these have not helped Washington’s overall debt picture. The lowest level of public debt over the next 10 years is still higher than any pre-Obama debt level since 1950.

Mandatory spending and interest costs will take up an increasing share of the federal budget. These costs total 68 percent of this year’s budget, and they will rise to 77 percent in 2025. This squeezes discretionary spending, including national defense, to a smaller share of the federal budget.

CBO projects poor news on the economic front as well. Inflation-adjusted economic growth is estimated to max out at 2.9 percent in 2015 and 2016. It is expected to average a paltry 2.1 percent per year from 2018-2025. This is partly due to Washington’s debt, but also partly due to Obamacare. CBO states that Obamacare will harm economic growth by raising effective tax rates on potential workers “and thus reduce the amount of labor that some workers choose to supply.” This report should be a wake-up call for the need to pursue pro-growth policies, as Senate Republicans have proposed.