The 2015 Long-Term Budget Outlook
CONGRESSIONAL BUDGET OFFICE (U S CONGRESS) WASHINGTON DC
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Chairman Enzi, Ranking Member Sanders, and Members of the Committee, thank you for the opportunity to testify on the Congressional Budget Office s most recent analysis of the outlook for the federal budget over the long term. My statement today summarizes The 2015 Long-Term Budget Outlook, which was released yesterday.1 The long-term outlook for the federal budget has worsened dramatically over the past several years, in the wake of the 2007 2009 recession and slow recovery. Between 2008 and 2012, financial turmoil and a severe drop in economic activity, combined with various policies implemented in response to those conditions, sharply reduced federal revenues and increased spending. As a result, budget deficits rose They totaled 5.6 trillion in those five years, and in four of the five years, they were larger relative to the size of the economy than they had been in any year since 1946. Because of the large deficits, federal debt held by the public soared, nearly doubling during the period. It is now equivalent to about 74 percent of the economy s annual output, or gross domestic product GDP a higher percentage than at any point in U.S. history except a seven-year period around World War II.2 If current law remained generally unchanged in the future, federal debt held by the public would decline slightly relative to GDP over the next few years, CBO projects. After that, however, growing budget deficits caused mainly by the aging of the population and rising health care costs would push debt back to, and then above, its current high level. The deficit would grow from less than 3 percent of GDP this year to more than 6 percent in 2040. At that point, 25 years from now, federal debt held by the public would exceed 100 percent of GDP. Moreover, debt would still be on an upward path relative to the size of the economy. Consequently, the policy changes needed to reduce debt to any given amount would become larger and larger over time.
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