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CED's Concerns About the Future of Our Fiscal Stability

On January 21, 2025, the President of the Committee for Economic Development (CED), David K. Young, expressed grave concerns regarding the latest projections released by the Congressional Budget Office (CBO). This report paints a troubling picture of the United States' fiscal health, with significant implications for policymakers and the economy at large.

Rising Deficits

The CBO's Budget and Economic Outlook for the period from 2025 to 2035 forecasts that the federal deficit will soar to $1.9 trillion in 2025, eventually escalating to a staggering $2.7 trillion by 2035. These deficits are projected to account for approximately six percent of the Gross Domestic Product (GDP), a steep increase compared to the historical average of 3.8% over the last five decades. This forecast is particularly alarming considering that it is emerging during a period of low unemployment, which typically correlates with reduced deficits.

The implications of these deficits are far-reaching. According to the CBO, the national debt held by the public is expected to reach 100% of GDP in 2025, climbing to 118% by 2035. This would mark a record high in U.S. history, raising immediate questions about the sustainability of the nation's fiscal policies.

The Drivers of Deficit Growth

Mandatory spending on programs like Social Security and Medicare, combined with the rising costs of servicing the national debt, are driving these historically elevated deficits. The CBO's projections indicate that net interest outlays, which are expected to exceed $952 billion in 2025, will surpass defense spending that same year. By 2035, net interest costs are anticipated to reach $1.8 trillion, representing approximately 4.1% of GDP and outpacing Medicare expenditures.

These trends necessitate a critical examination of the fiscal strategies currently in place and underscore the need for actionable reforms.

A Call for Bipartisan Solutions

In light of the imminent challenges detailed in the recent CBO projections, CED is reiterating its call for the establishment of a bipartisan Congressional commission focused on fiscal responsibility. This group would be tasked with considering comprehensive strategies aimed at addressing the growing deficits and national debt, safeguarding Social Security, and modernizing Medicare.

It's noteworthy that the CBO's projections must adhere to current laws on taxation and spending, including the planned expiration of key provisions from the 2017 Tax Cuts and Jobs Act (TCJA) by the end of this year. There is ongoing speculation that Congress may extend some of these provisions without implementing necessary offsets, which could exacerbate the debt situation. The CBO estimates that permanently extending these provisions could increase the primary deficit by $4 trillion, in addition to raising net interest outlays by $600 billion over the next decade.

Urging Immediate Action

As the new Congress and Administration deliberate on their fiscal strategies, it is vital that they address the long-term trajectory of the federal budget. Doing so presents a critical opportunity to redirect fiscal policy towards stability and sustainable economic growth.

The need for accountability and decisive action has never been more urgent. Failure to confront the escalating deficits could lead to adverse consequences for the economy, including heightened inflation and reduced public investment.

About CED

CED is the public policy center of The Conference Board, a nonpartisan, nonprofit organization that brings forward trusted insights for the future. Founded in 1916, CED strives to deliver well-researched analysis aimed at promoting solutions in the nation's best interest. Its Board of Trustees is comprised of leading executives from over 30 industries representing more than 4 million employees.

In conclusion, the CED's response to the CBO's projections highlights the necessity for immediate, collaborative efforts towards fiscal reform to ensure the economic future of the United States remains robust and sensible.