The 2020 Long-Term Budget Outlook

Percentage of Gross Domestic Product

Increases in receipts from individual income taxes account for most of the rise in total revenues. Those receipts increase in 2025 because of the expiration of nearly all provisions of the 2017 tax act that affect individual income taxes.

Percentage of Gross Domestic Product

Over the long term, the largest source of growth in tax revenues is real bracket creep—the process in which, as income rises faster than inflation, a larger proportion of income becomes subject to higher tax rates.

Policy Changes Needed to Meet Various Targets for Debt

The reduction in the annual primary deficit (which excludes net spending for interest) needed to make federal debt held by the public in 2050 equal a certain goal would be smaller the sooner the policy changes were implemented.

Percentage of Gross Domestic Product

Even if policymakers took action soon, significant cuts to primary deficits would be necessary for debt to equal 100 percent of GDP in 2050.

The 2020 Long-Term Budget Outlook

Overview

By the end of 2020, federal debt held by the public is projected to equal 98 percent of gross domestic product (GDP)—its highest level since shortly after World War II. If current laws governing taxes and spending generally remained unchanged, debt would first exceed 100 percent of GDP in 2021 and would reach 107 percent of GDP, its highest level in the nation’s history, by 2023, the Congressional Budget Office projects.

Debt would continue to increase in most years thereafter, reaching 195 percent of GDP by 2050 (see Figure 1[3]). That amount of debt would be the highest by far in the nation’s history, and it would be on track to increase further. High and rising federal debt makes the economy more vulnerable to rising interest rates and, depending on how that debt is financed, rising inflation. The growing debt burden also raises borrowing costs, slowing the growth of the economy and national income, and it increases the risk of a fiscal crisis or a gradual decline in the value of Treasury securities.

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