BEYOND THE NUMBERS
Greenstein on the Revised Long-Term Budget Picture
On the one hand, what we find is marked improvement since previous projections — including our own previous projections — in the long-term fiscal outlook, but on the other hand, the long-term outlook, while substantially improved, remains challenging and will still require difficult policy choices.
I’ll focus, as our analysis does, on the key measure: the ratio of debt to Gross Domestic Product. Analysts regard the debt-to-GDP ratio as fundamental. A continually rising debt-to-GDP ratio means the debt is continually growing faster than the economy, and that eventually poses various problems for the U.S. economy. The debt-to-GDP ratio was 73 percent of GDP at the end of 2012. We project that it will rise to 78 percent in 2023 and to 99 percent in 2040. A 99 percent debt ratio is a significant concern. But we no longer project the debt to grow at an explosive rate, as most previous estimates, including ours, indicated. Since we last issued our previous long-term projections in early 2010, the projected debt-to-GDP ratio in 2040 has shrunk by half — from 218 percent of GDP to 99 percent.Click here for the CBPP’s report on the issue and here for the audio of the presentation portion of the call.