The New Federal Budget Forecast Is Completely Unrealistic

Economy & Policy

The New Federal Budget Forecast Is Completely Unrealistic

August 28, 2014

American infantry trainees perform calisthenics in Atlantic City, N.J., in the early 1940s

Photograph by FPG/Getty Images

American infantry trainees perform calisthenics in Atlantic City, N.J., in the early 1940s

The long-term outlook for the federal budget is worse than you would gather from Wednesday’s update from the Congressional Budget Office (PDF), and the CBO’s report is worrisome enough to start with. It says that “if current laws generally remain unchanged,” budget deficits will start growing again in a few years, and by 2024, debt held by the public will equal 77.2 percent of gross domestic product.

The reality could be bleaker yet. The CBO is required by Congress to assume in its baseline forecast that current laws remain the same, even if that seems unlikely to happen. As a result, the baseline forecast bakes in some unlikely projections. As the CBO notes, it is assuming that three of the biggest items in the federal budget will decline by 2024 to their smallest share of GDP since 1940*.

The three expenditure categories that are supposed to wither away are discretionary spending on defense, discretionary spending on everything other than defense, and mandatory spending on everything other than interest payments, Social Security, and major health programs. Just to be clear, that broad group includes the Pentagon, the federal courts, the interstate highways, the prisons, immigration, agriculture, education, and really just about everything the government does except transfer payments and debt payments.

Here’s the chart that shows what the CBO is projecting. Again, this is not what the CBO predicts will happen, but what it’s required to assume by order of Congress.

The biggest cut that’s penciled in is to discretionary spending. Here’s what the CBO has to say about that:

Discretionary Spending. Discretionary spending encompasses a wide array of federal activities funded or controlled through annual appropriations—including, for example, most defense spending and outlays for highway programs, elementary and secondary education, housing assistance, international affairs, and administration of justice. Measured as a share of GDP, discretionary outlays are projected to drop from 6.8 percent in 2014 to 5.2 percent in 2024; over the past 40 years, they have averaged 8.3 percent.

Could happen. But if you doubt that the federal government will shrink to its pre-Pearl Harbor size, then you should be even more concerned about the long-term outlook for balancing the federal budget.

Author: AFGE Local 704

Representing over 900 bargaining unit employees working at the U.S. EPA Region 5 Offices in Chicago, Ann Arbor, MI and Westlake, OH.

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