The 2022 Long-Term Budget Outlook
The U.S. faces a challenging fiscal outlook according to CBO's extended baseline projections, which show budget deficits and federal debt held by the public growing steadily in relation to gross domestic product over the next three decades.
Each year, the Congressional Budget Office publishes a report presenting its budget projections and economic forecast for the next 30 years under the assumption that current laws governing taxes and spending generally do not change. This report is the latest in the series.
At 3.9 percent of gross domestic product (GDP), the projected deficit in 2022 is much smaller than those recorded in 2020 and 2021, because federal spending in response to the coronavirus pandemic has waned and revenues have risen sharply. Nevertheless, in CBO’s projections, federal deficits over the 2022–2052 period average 7.3 percent of GDP (more than double the average over the past half-century) and generally grow each year, reaching 11.1 percent of GDP in 2052. That projected growth in total deficits is largely driven by increases in interest costs: Net interest outlays more than quadruple over the period, rising to 7.2 percent of GDP in 2052. Primary deficits—that is, deficits excluding net outlays for interest—grow from 2.3 percent of GDP in 2022 to 3.9 percent in 2052.
By the end of 2022, federal debt held by the public is projected to equal 98 percent of GDP. The rapid growth of nominal GDP—which reflects both high inflation and the continued growth of real GDP (that is, GDP adjusted to remove the effects of inflation)—helps hold down the amount of debt relative to the nation’s output in 2022 and 2023. In CBO’s projections, debt as a percentage of GDP begins to rise in 2024, surpasses its historical high in 2031 (when it reaches 107 percent), and continues to climb thereafter, rising to 185 percent of GDP in 2052.
Debt that is high and rising as a percentage of GDP could slow economic growth, push up interest payments to foreign holders of U.S. debt, heighten the risk of a fiscal crisis, elevate the likelihood of less abrupt adverse effects, make the U.S. fiscal position more vulnerable to an increase in interest rates, and cause lawmakers to feel more constrained in their policy choices.
In CBO’s projections, outlays in 2022 are 23.5 percent of GDP—less than last year’s total—and they continue to decline in 2023 and 2024 as federal spending in response to the pandemic diminishes. Outlays then steadily increase, reaching 30.2 percent of GDP in 2052. Rising interest costs and growth in spending on the major health care programs and Social Security—driven by the aging of the population and growth in health care costs per person—boost federal outlays significantly over the 2025–2052 period.
In CBO’s projections, revenues rise to 19.6 percent of GDP in 2022, one of the highest levels ever recorded, because of sizable increases in collections of individual income taxes. After falling in relation to the size of the economy for the next few years, revenues increase in 2026, largely because of scheduled changes in tax rules. They continue to rise after 2030 as an increasing share of income is pushed into higher tax brackets. In 2052, revenues reach 19.1 percent of GDP.
Future economic conditions are uncertain. But even if they were more favorable than CBO currently projects, debt in 2052 would probably be much higher than it is today. Moreover, according to CBO’s analysis, if future paths for spending and revenues were more consistent with such paths in the past, debt in 2052 would probably be much higher than CBO projects.
In this year’s projections, debt as a percentage of GDP is lower in most years than CBO projected last year. In the current projections, federal debt rises from 98 percent of GDP in 2022 to 180 percent in 2051. Those amounts are lower than CBO’s previous projections—by 4 percentage points and 22 percentage points, respectively.