My colleagues at the Center on Budget and Policy Priorities have issued updated long-term budget projections that might change how you think about government spending, deficits and debt – because they show that while policymakers still have work to do, the long-term budget outlook has improved significantly in recent years. Specifically, the center’s projections show that under current budget policies:

1. Deficits are not spiraling out of control. Federal deficits (the annual gap between spending and revenues) have fallen sharply in relation to the economy since peaking at 10 percent of gross domestic product in 2009, at the height of the Great Recession. The center projects – based on data and projections from the Congressional Budget Office and the latest reports of the Social Security and Medicare Trustees – that deficits will be below 3 percent of GDP through 2018 but begin rising thereafter. Even in 2040, however, the deficit will be half its 2009 level.

2. No debt crisis looms. Federal debt (total borrowing to finance all past deficits minus surpluses) will be virtually flat as a share of GDP for the next several years and rise only slowly thereafter. Debt in 2040 will about equal that year’s GDP – which is less than half of what the center projected for the debt-to-GDP ratio in 2010 (see Figure 1).

[GALLERY: Cartoons on the Economy]



Center on Budget and Policy Priorities



3. Spending is not out of control. The Great Recession and the measures taken to address it produced a sharp spike in spending in 2009. Since then, however, spending has fallen sharply in relation to the economy (see Figure 2). Going forward, spending will rise from 20.4 percent of GDP in 2014 to 24.1 percent of GDP in 2040. About four-fifths of that increase, however, will stem from interest payments on the public debt, not from programs that pay benefits to ordinary Americans and perform government functions. As Figure 2 shows, “primary” (non-interest) spending rises very little between now and 2040, when it’s just 1 percentage point of GDP higher than revenues.



Center on Budget and Policy Priorities