Director’s Desk
On Monday the Congressional Budget Office issued its new Budget and Economic Outlook: 2015 to 2025. There’s good news and bad news. The good news is that deficits have come down dramatically since the record $1.2 trillion deficit in FY09, to $483 billion in FY14, and will shrink even more this year and next, to a projected $467 billion in FY16.
The bad news is that deficits will begin to climb again after that, and reach more than $1 trillion again by 2025, adding an additional $7.6 trillion to our already massive $18 trillion debt. Along with increases in entitlement programs, net interest payments on the debt are projected to grow from this year’s $227 billion to $827 billion by 2025, a nearly four times increase. These increases will put tremendous pressure on discretionary spending, which is projected to shrink from its current 34% of the federal budget to 23% by 2024.
While discretionary spending is the smallest part of the long-term fiscal crisis, it has born the largest share of deficit reduction, and remains the easiest target politically. But further cuts to discretionary spending alone will not solve the long-term crisis, and both parties in Congress fully understand that. The first indication of how the 114th Congress will address the crisis will come at the end of March, when new Budget Committee Chair Tom Price issues the House version of the FY16 congressional budget resolution (see my accompanying Newsletter article).
