Staff Reports
The Congressional Budget Office (CBO) published its most recent assessment of the federal government’s budget and economic forecast for the next ten years this week. Unfortunately, the news wasn’t positive. According to the CBO, despite the Federal Reserve’s aggressive interest rate hikes, inflation will only start to decrease in 2023 and won’t reach the Fed’s target of two percent until 2027. Additionally, these rate hikes will result in a cessation of real GDP growth in 2023, and the unemployment rate is anticipated to rise until early 2024.
CBO Director Phillip Swagel discusses the current budget and economic outlook. https://t.co/vQCA36QCzi
— U.S. CBO (@USCBO) February 15, 2023
As per the CBO’s report, the federal deficit is expected to reach $1.4 trillion in 2023 and have an average of $2.0 trillion annually from 2024 through 2033. This is considerably higher than the average deficit of 3.6 percent of GDP over the last 50 years. The cumulative deficit projected for the period of 2023-2032 is $3 trillion greater than the estimate made in May 2021. The increase is primarily attributed to the enactment of new legislation and adjustments to the economic outlook.
According to the CBO’s findings, federal debt held by the public is estimated to increase from 98 percent in 2023 to 118 percent in 2033 of GDP, which amounts to an average yearly increase of 2 percentage points. This escalation is a result of interest expenses and mandatory spending rising at a faster pace than revenue and economic growth. The debt scenario is expected to worsen further, with federal debt projected to reach 195 percent of GDP by 2053.
The CBO’s report also stated that the “extraordinary measures” currently employed by the Treasury Department to prevent a default on debts will be depleted sometime between July and September 2023. Nevertheless, the exact date is uncertain as the anticipated income tax receipts could fluctuate. If the debt limit is not elevated or suspended before these measures are exhausted, the government would be unable to make full payments on its obligations, causing a delay in payments or a potential default on its debt commitments.
The CBO’s assessment depicts a bleak outlook for America’s economic future unless modifications to fiscal policy are implemented to tackle the growing interest expenses and counteract other harmful effects of mounting debt. Whether President Biden or Democrats in Congress will take the essential steps to implement these changes is yet to be determined.
The preceding article is a summary of an article that originally appeared on Townhall
