BEYOND THE NUMBERS
Projected Ten-Year Deficits Down by Nearly $5 Trillion, Mostly Due to Legislative Changes
Since 2010, projected ten-year deficits over the 2015-2024 decade have shrunk by almost $5.0 trillion, $4.1 trillion of which is due to four pieces of legislation enacted in the intervening years, according to our new paper:
Some 77 percent of the savings from those pieces of legislation — which include the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012 — come from program cuts, 23 percent from revenue increases. Projected deficits have also fallen because of a dramatic slowdown in health spending.
The reduction in ten-year deficits improves the long-term budget picture as well, relative to the outlook of several years ago. In 2010 we projected that, under current budget policies, the debt held by the public would reach 218 percent of gross domestic product (GDP) by 2040. Our new estimate, derived from the Congressional Budget Office’s (CBO) new ten-year baseline, shows debt at slightly less than 110 percent of GDP in 2040.
Although far more favorable than those of 2010, our current projections still show that significantly more deficit reduction will ultimately be needed to put the debt on a stable path as a share of the economy over the medium and long term. But, because the economy has not yet fully recovered from the Great Recession, the desirability of additional long-term deficit reduction should not displace the need for up-front job and income creation. The appropriate mix is one of short-term measures to bolster the still-sluggish recovery and increases in investments that can boost long-term growth (e.g., infrastructure, education, early childhood programs, and basic research), along with revenue and spending measures that reduce mid- and long-term deficits and take effect as the economy strengthens.
This interactive graph shows how legislative and other changes since 2010 have produced the nearly $5 trillion improvement.