Under current budget policies, we project that the ratio of debt to gross domestic product — which was 74 percent at the end of fiscal year 2014 — will drop slightly to 73 percent by 2017 but grow to 92 percent by 2040. That’s a marked improvement over the situation just five years ago (see chart), but policymakers need to take further significant steps to address the problem.
Policymakers shouldn’t ignore the long-run budget problems, which remain challenging. No deficit or debt crisis looms, however, and promoting further labor market improvements remains the nation’s most immediate economic concern. Policymakers should therefore avoid too much deficit reduction too soon, which would weaken the economic recovery, and focus deficit-reduction efforts on measures that take effect after the labor market has more fully recovered.
Our new projections update those we published in May 2014 to reflect the latest Congressional Budget Office ten-year and long-term budget projections, the latest projections by the Social Security and Medicare trustees, changes in budgetary policies, and other recent developments. On a comparable basis, our new projections are very similar to last year’s.