They’re a little late, but the Congressional Budget Office’s (CBO’s) updated budget numbers are finally out. They tell a fiscal story that is not surprising to anyone who has been paying attention to government spending over the past few years, but is worrisome nonetheless. Unfortunately, there’s little reason for optimism that Congress is about to get its act together.
The CBO usually releases its updated budget baseline around the beginning of the year, but was late this year due to delays in Congress’s appropriations process. But even as the updated CBO numbers show a government transitioning from crisis mode to more “normal” spending levels, they also show that “normal” is not sustainable.
In 2020 and 2021, Congress operated primarily in fear of not spending enough, and it showed. Deficits were around $3 trillion for both years, even though by early 2021 the policy justifications for spending blowouts had largely dissipated. Some spending increases are to be expected during a once-in-a-century pandemic — indeed, one of the major reasons for fiscal discipline in normal times is to preserve policymakers’ capacity to respond to crises. Unfortunately, the consequences of pandemic-era spending are likely to be long-lasting for taxpayers.
In January of 2020, just a couple months before the pandemic began to bite, CBO projected that the national debt would increase by $12.4 trillion in the decade between 2020 and 2029. That amount was certainly nothing to scoff at — representing a substantial increase on the $16.8 trillion in debt held by the public at the end of 2019. Had this held true, the ratio of debt held by the public to GDP would have increased from 79 percent at the beginning of 2020 to 96 percent at the end of 2029.
Well, those numbers look positively rosy two years later. CBO estimates debt held by the public will now be $33.8 trillion by 2029 — in its January 2020 estimate, CBO estimated this amount at $29.7 trillion. Even though CBO projects GDP will also be nearly $2 trillion higher at the end of 2029, they still project the debt-to-GDP ratio will rise, to 103 percent.
Perhaps more concerning is where debt figures are trending. Between 2030 and 2032, CBO projects that the federal government will average deficits of over $2 trillion, resulting in a $40 trillion national debt by 2032. In other words, even in the absence of the once-in-a-generation pandemic, we’ll be spending like there is one every year.
The further out one looks into the future, the scarier the fiscal picture gets. CBO projects that thirty years from now, the federal government will have a debt-to-GDP ratio of 185 percent. For context, Greece had a debt-to-GDP ratio of 127 percent by the end of 2009 — at which point the country was considered fiscally profligate and in need of bailouts.
Such high levels of debt have real costs. CBO projects that in the decade between 2043 and 2052, just the cost of paying interest on the national debt will match the cost of the entire Social Security program and will exceed all discretionary spending, including national defense.
Given these numbers, one would think that the number one priority in Congress would be reining in this out-of-control spending. Instead, the last few months have been spent debating the $4.1-trillion Build Back Better legislation and its successor proposals. As bad as the fiscal situation is now, there are a hundred proposals in Congress to make it even worse.
Every possible metaphor for overspending has been well worn out when it comes to the federal government’s fiscal habits. So instead, taxpayers should just know the basic fact: Congress is being irresponsible with their money, and future generations won’t thank them for it.
