Today, the Congressional Budget Office (CBO) released its Budget and Economic Update, under which current law debt is now projected to beon a declining path by mid-decade. According to CBO’s projections, debt held by the public will rise from 67 percent of GDP in 2011 to a high of 73 percent in 2013, before falling to 61 percent by 2021.
As with past CBO baselines, however, current law projections are unlikely to materialize due to a number of unrealistic assumptions. In particular, CBO assumes that policymakers will discontinue their annual practice of passing AMT patches and doc fixes, continue to spend what we are today in Iraq and Afghanistan, and allow all of the 2001/2003/2010 tax cuts to expire as scheduled, and that the newly-appointed Joint Select Committee on Deficit Reduction (Super Committee) will identify $1.2 trillion in unspecified savings. In addition, CBO’s new projections are based on economic assumptions from early July, which CBO now views as overly-optimistic.
Under our more realistic set of budgetary projections, which assumes that recently-enacted discretionary caps remain in place but does not include additional savings from the Joint Select Committee on Deficit Reduction(Super Committee), debt would rise to 74 percent of GDP in 2013 and over 81 percent by 2021. Even if the $1.2 trillion in Super Committee savings were to materialize, debt would still be on an upward path and would exceed 76 percent of GDP by 2021.
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