Higher Deficits in New CBO Forecast Don’t Reflect Higher Spending

February 4, 2014 at 5:28 pm

The new Congressional Budget Office (CBO) budget estimates are more pessimistic than those it released last May, showing deficits that are $1 trillion higher over 2014 through 2023.  This worsening budget outlook reflects lower revenues, not higher spending.  In fact, CBO now projects lower spending over the decade than it did last year.

As the chart shows, the $1 trillion increase in CBO’s ten-year deficit forecast reflects a $1.6 trillion drop in CBO’s revenue forecast, partly offset by a $600 billion decline in projected spending.

CBO’s revenue projections have fallen largely because it has lowered its estimates of the size of the economy (gross domestic product or GDP) over the period.

Because of CBO’s lower estimated GDP, spending as a share of the economy is somewhat higher in 2023 than CBO projected last May.  To be sure, spending as a share of GDP is the appropriate metric to assess spending over time.  But this increase is not due to policy changes or any other developments to boost spending, but, instead, to a smaller projected GDP against which spending is measured.  (Stated another way, CBO has lowered its federal spending projection over the next decade, but it has lowered its GDP projection too — and by a larger percentage.)

Print Friendly

More About Joel Friedman

Joel Friedman

Joel Friedman is Vice President for Federal Fiscal Policy at the Center on Budget and Policy Priorities, where he specializes in federal budget and tax issues.

Full bio | Blog Archive | Research archive at CBPP.org

Your Comment

Comment Policy:

Thank you for joining the conversation about important policy issues. Comments are limited to 1,500 characters and are subject to approval and moderation. We reserve the right to remove comments that:

  • are injurious, defamatory, profane, off-topic or inappropriate;
  • contain personal attacks or racist, sexist, homophobic, or other slurs;
  • solicit and/or advertise for personal blogs and websites or to sell products or services;
  • may infringe the copyright or intellectual property rights of others or other applicable laws or regulations; or
  • are otherwise inconsistent with the goals of this blog.

Posted comments do not necessarily represent the views of the CBPP and do not constitute official endorsement by CBPP. Please note that comments will be approved during the Center's business hours. If you have questions, please contact communications@cbpp.org.

+ five = 8

 characters available