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Greenstein on the Revised Long-Term Budget Picture


CBPP President Bob Greenstein discussed our major new report on the long-term budget outlook on a conference call we held for journalists yesterday.  He said in part:

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.