The 2020 Long-Term Budget Outlook

Because of the current pandemic, the projections in this report are subject to an unusually high degree of uncertainty. That uncertainty stems from many sources, including changes to demographics (how the pandemic will affect rates of fertility, net immigration, and mortality), the economy (how the pandemic will affect economic growth and interest rates), and health care expenditures (how the pandemic will shift the demand for and supply of health care services). Uncertainty also surrounds the effectiveness of monetary and fiscal policy and the response of global financial markets to the substantial projected increases in public deficits and debt. The agency expects to examine uncertainty in its projections in greater depth in the next report in this series.

Changes From Last Year’s Long-Term Budget Outlook

As a share of GDP, federal debt and deficits are now projected to be greater over the next three decades than CBO projected last year. In the agency’s current extended baseline projections, debt reaches 189 percent of GDP in 2049, which is 45 percentage points higher than the amount the agency projected last year. In addition, projected primary and total deficits as a share of GDP in this year’s report are larger throughout most of the projection period than those in last year’s report. (See Appendix B[31] for more information on the changes in CBO’s long-term budget projections since last year.)

Higher projected outlays and lower projected revenues at the beginning of the 30-year period contribute significantly to those upward revisions to the agency’s projected deficits. The increase in those deficits results primarily from the effects of the pandemic and actions taken to respond to it. Partially offsetting those changes is net spending for interest on the debt, which is now projected to be lower through 2033 than in last year’s projections. Net spending for interest rises faster through the end of the projection period than it was projected to in last year’s report, however, as greater federal borrowing increases average interest rates on that debt. In addition, over the next three decades discretionary spending is higher than it was projected to be last year, primarily because of higher caps on discretionary funding in 2020 and 2021 put in place by the Bipartisan Budget Act of 2019 and the projected growth from the higher 2021 amount. Revenues are projected to be lower than they were in last year’s projections because of legislative changes, such as the repeal of the tax on employment-based health insurance plans with high premiums and a reduction in the projected rate of real bracket creep stemming from the downward revision to the agency’s projections of economic growth.

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