The Congressional Budget Office’s Latest Forecast: More Spending and Debt

The latest federal budget projections from the Congressional Budget Office (CBO) should set off alarm bells on Capitol Hill. According to CBO’s baseline, federal debt held by the public will climb from $14 trillion this year to almost $24 trillion in fiscal year 2026. Measured as a share of the economy, publicly held debt as a percentage of GDP is projected to jump substantially, from 75.6 percent to 86.1 percent in the next 11 years. As the following chart shows, current debt levels are already disconcertingly high.

Policymakers seeking to get federal debt under control will need to rein in the debt’s main driver: federal spending. The following chart shows major categories of federal spending as a share of total spending under CBO’s forecast.

The chart shows that expenditures for Social Security and the government’s major healthcare programs (Medicare and Medicaid), which already dominate the federal budget, will account for most of the projected growth of total federal outlays. Also notable is the projected growth of interest on the federal debt. And for those who believe that increasing the burden on taxpayers is the solution to the debt problem, CBO notes that federal revenues as a share of GDP are already projected to be higher in the next decade than the average over the past 50 years.

There is no viable alternative to controlling federal spending if policymakers are to address to the problem of federal debt.