The Congressional Budget Office is projecting that the federal debt will rise steadily over the next 10 years to nearly 100% of GDP by 2028 — an amount “far greater than the debt in any year since just after World War II.”
The projections are also greater than those projected by the CBO in June due to the tax cut legislation approved since then as well as the latest federal budget and appropriations acts.
“The legislation has significantly reduced revenues and increased outlays anticipated under current law,” the CBO report notes.
The CBO is now projecting a cumulative deficit of $11.7 trillion over the 2018-2027 period, which is $1.6 trillion larger than its projection in June. Revenues are lowered by $1.0 trillion and projected outlays are increased by $500 billion.
For 2018, the deficit is expected to top $800 billion, about $140 billion more than the shortfall last year.
The CBO projects that GDP will expand at an average annual rate of 1.9% between 2018 and 2028, which incorporates a big jump in growth this year to 3.3% followed by slower growth in succeeding years: 2.4% in 2019, then 1.7% from 2020-2026 and 1.8% in each of the next two years.
“The largest effects on GDP over the decade stem from the tax act,” according to the CBO. “Those projected effects grow in the earlier years of the period and become smaller in the later years.”
In the CBO’s projections, budget deficits increase as a percentage of GDP from 4.2% this year to 5.1% in 2022 — a percentage that has been topped in only five of the years since 1946, four of them following the 2007-2009 recession.
Deficits remain at 5.1% through 2025 before dipping in later years to average 4.9% of GDP over the 2021–2028 period.
Revenues are projected to remain near 16.6% of GDP for the next few years, then rise steadily to reach 17.5% by 2025. When some provisions of the tax act expire afterward, revenues are projected to top 18% from 2026 to 2028.