What changes in federal budget deficits would be necessary to reduce debt held by the public over the long term? CBO analyzed the primary deficit reductions necessary to meet three different debt targets in four different time frames.
Budget
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Expanding on its earlier long-term baseline projections, CBO shows how the federal budget and the economy would evolve under three scenarios in which laws would be changed to continue certain policies now in place, leading to higher debt.
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CBO has developed “rules of thumb” that show how changes in four key economic variables might affect revenues, outlays, and deficits. An interactive workbook allows users to see the budgetary effects of their own alternative scenarios.
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If current laws remain generally unchanged, CBO projects, federal budget deficits and debt would increase over the next 30 years—reaching the highest level of debt relative to GDP in the nation’s history by far.
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Over the next 10 years, the cumulative deficit under the President’s proposals would be $3.0 trillion less than the $12.4 trillion in CBO’s baseline. The deficit would average 3.7 percent of GDP, CBO estimates.
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CBO and JCT project that the federal subsidies, taxes, and penalties associated with health insurance coverage for people under age 65 will result in a net subsidy from the federal government of $685 billion in 2018.
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In CBO’s projections, the economy grows relatively quickly this year and next and then more slowly in the following several years. The federal budget deficit rises substantially, boosting federal debt to nearly 100 percent of GDP by 2028.
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View CBO’s updated budget infographics to see how much the federal government spent and took in during fiscal year 2017, as well as broader trends in the budget over the past few decades.
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This report assesses the accuracy of projections that CBO and JCT made in 2010 and 2013 of federal spending for people made newly eligible for Medicaid by the ACA and of subsidies for health insurance purchased through the ACA marketplaces.
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In the baseline projections CBO has issued each spring, projected outlays have generally been close to actual amounts, although they have been too high, on average—a consequence of the agency’s economic forecasts and other factors.
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CBO and the JCT estimate that enacting the legislation would reduce the deficit by $3.8 billion over the 2018–2027 period without substantially changing the number of people with health insurance coverage, on net.
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Over the 2017-2026 period, CBO and JCT estimate, the legislation would reduce the on-budget deficit by at least $133 billion and result in millions fewer people with comprehensive health insurance that covers high-cost medical events.
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CBO and JCT project that the federal subsidies, taxes, and penalties associated with health insurance coverage for people under age 65 will result in a net subsidy from the federal government of $705 billion in 2017.
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Under the President’s proposals, budget deficits from 2018 through 2027 would total nearly one-third less than those in CBO’s baseline projections, ranging between 2.6 percent and 3.3 percent of GDP, down from 3.6 percent in 2017.
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Medicaid spending under the Better Care Reconciliation Act of 2017 would be about 35 percent lower in 2036 compared with CBO’s extended baseline. Such spending under the bill would increase each year throughout the next two decades.
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Under current law, deficits in CBO’s baseline projections continue to climb over the next decade, driving up federal debt. Economic growth remains modest, at about 2.0 percent through 2018 and then 1.9 percent later in the period.
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If current laws remained generally unchanged, the United States would face steadily increasing federal budget deficits and debt over the next 30 years—reaching the highest level of debt relative to GDP ever experienced in this country.
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CBO periodically issues a volume of options—this year’s installment presents 115—that would decrease federal spending or increase federal revenues over the next decade. The report is available both as a PDF and in a searchable format.
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CBO compares its economic forecast, as presented in An Update to the Budget and Economic Outlook: 2016 to 2026, with historical experience and discusses why economic growth in coming years is projected to diverge from historical trends.
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CBO discusses several uncertainties in the outlook for the U.S. economy, as described in An Update to the Budget and Economic Outlook: 2016 to 2026.
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CBO and the staff of the Joint Committee on Taxation (JCT) project that, between 2017 and 2026, the President’s budget would result in deficits averaging 3 percent of GDP and totaling $6.9 trillion, $2.4 trillion less than CBO’s baseline.
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CBO projects a $534 billion deficit in fiscal year 2016, about $100 billion more than in 2015. If current laws generally remained unchanged, the deficit would increase from 2.9 percent to 4.9 percent of GDP over the next decade.