The Long-Term Budget Outlook

http://cboblog.cbo.gov/?p=328

Today I had the opportunity to testify before the Senate Budget
Committee about CBO's most recent analysis of the long-term budget
outlook.

Under current law, the federal budget is on an unsustainable path,
because federal debt will continue to grow much faster than the
economy over the long run. Although great uncertainty surrounds
long-term fiscal projections, rising costs for health care and the
aging of the population will cause federal spending to increase
rapidly under any plausible scenario for current law. Unless revenues
increase just as rapidly, the rise in spending will produce growing
budget deficits. Large budget deficits would reduce national saving,
leading to more borrowing from abroad and less domestic investment,
which in turn would depress economic growth in the United States. Over
time, accumulating debt would cause substantial harm to the economy.
The following chart shows our projection of federal debt relative to
GDP under the two scenarios we modeled.
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