This morning, CBO released its new long-term budget outlook and I am testifying before the House Budget Committee on our report. The report presents 75-year projections of federal spending and revenues under two alternative sets of assumptions, each of which represents a possible interpretation of current fiscal policy. Given the reputation of economics as the "dismal science" (which itself originated in part from flawed long-term predictions...), it is important to recognize that the budget outlook presents the implications of current fiscal policy -- and does not represent a prediction of the future that policymakers are powerless to affect. The adverse consequences of the nation's current long-term fiscal trajectory are serious, but they can be addressed through changes in spending and revenue policies. (In addition, any projections that go out far into the future are subject to vast economic and technical uncertainty. Nevertheless, the implications of these projections are clear and daunting.) The outlook makes several key points:
More specifically, CBO examines two scenarios. (In its previous long-term budget outlook, CBO analyzed six scenarios, but many observers viewed the multiplicity of scenarios as too confusing. So this report focuses on two.)
A useful metric for the size of the adjustments in either spending or revenues required to avoid unsustainable increases in government debt is provided by the so-called "fiscal gap." The gap measures the immediate and permanent change in spending or revenues necessary to avoid a rise in debt as a share of GDP over a given period.
The report was put together mostly by our Long Term Modeling Group (LTMG) within the Health and Human Resources Division at CBO. Joyce Manchester, who had been a senior official at the Social Security Administration, recently joined CBO and assumed leadership of this group. Many outstanding analysts within LTMG and elsewhere in CBO contributed to the report -- Noah Meyerson, Julie Topoleski, Douglas Hamilton, Michael Simpson, Sven Sinclair, Ralph Smith, Lyle Nelson, Sam Papenfuss, and David Weiner all played key roles in writing the report, and many others worked on the simulations contained in it. A report of this size and complexity also involves a substantial editing challenge. We have an exceptional editing team, which is led by John Skeen; Christine Bogusz and Leah Mazade worked on editing this report. The editors often have to struggle not only with tight deadlines but also the need to help us translate complex economic and budget concepts into what we hope becomes clear writing. And then there's catching those inevitable typos!