A FAIR summary of the debate over fiscal policy in the presidential campaign so far might go like this: Republicans spout apocalyptic but vague rhetoric about the federal debt, while proposing few if any specific spending cuts — and backing immense new tax cuts, skewed in favor of upper-income Americans. Democrats propose to expand existing entitlement programs and otherwise increase social spending, while treating deficits and the debt as yesterday’s problems, if at all.
Now comes the Congressional Budget Office, the indispensable keeper of objective data and analysis on taxes and spending, to remind everyone of the truth: The country’s long-term fiscal predicament, far from being settled, is worsening markedly. This year, the federal budget deficit as a share of the economy will resume growing for the first time since 2009, and that will continue through 2026, according to the CBO’s just-published summary of its latest 10-year forecast. At the end of 2026, the publicly held federal debt will be 86 percent of total output, more than double its pre-recession level and higher than at any previous time since the years just following World War II. As recently as August, the CBO’s “baseline” showed debt at 77 percent of output by 2025.
What’s more, this new projection reflects $1.5 trillion in additional deficit spending beyond what the CBO forecast in August. Ominously, about 30 percent of this extra debt accumulation is due to a gloomier outlook for economic growth. An additional 50 percent of it reflects less revenue and more spending as a result of last year’s bipartisan deals on the budget and taxes.
To be sure, many of those tax cuts and spending increases would have occurred anyway but, due to arcane “scoring” rules, they were not reflected in the CBO’s budget assumptions until Congress overtly legislated them last year. So, to some extent, the budget office’s new concern simply reflects the law’s new honesty about budgeting. Still, the change for the worse in the economic forecast is a reminder of how sensitive budget predictions are to factors beyond Congress’s control, and of the fact that one consequence of chronic deficits is reduced “fiscal space” to deal with any unexpected recessions.
In short, the nation’s debt predicament is officially more difficult than previously acknowledged. The leading candidates for president have no serious plans to address it. Now that there’s no denying the real size of our fiscal hole, maybe at least they could stop promising to dig it even deeper.