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Congressional Budget Office downgrades fiscal outlook, but not because of debt


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2550849Washington Examiner:

The outlook for the federal debt is still grim, the Congressional Budget Office reported Tuesday, and largely unchanged despite the rollout of Obamacare and a budget deal since its last projection were issued.


The CBO, Congress' nonpartisan budget scorekeeper, estimated that the budget outlook has deteriorated slightly since its 2013 projections: The federal debt is now projected to be 106 percent of the country's economic output in 2039, up from 102 percent previously, if current law is maintained. In a more realistic scenario, allowing for likely fixes to the budget, that total will be 180 percent. Both scenarios involve the nation's obligations on an “upward path relative to the size of the economy, a trend that could not be sustained indefinitely.”


The current federal debt held by the public is roughly $12.5 trillion and will total 74 percent of gross domestic product this year, according to the CBO.

But the worsening debt-to-GDP ratio is not due to greater debt accumulation, according to the CBO. Instead, it's a function of slower anticipated economic growth. The CBO had previously downgraded its estimates of economic growth to reflect the economy's weak performance in recent years and its projections for slower labor force and productivity growth.Scissors-32x32.png

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Debt from Obama administration will lead to big federal deficits: CBO


Budget cuts and tax increases over the last few years have helped improve the federal government’s financial picture for now — but over the next few decades big deficits will return, deepened partly by all of the debt racked up over the last seven years, the Congressional Budget Office reported Tuesday.


“CBO’s extended baseline projections show a substantial imbalance in the federal budget over the long run, with revenues falling well short of spending,” Congress’s non-partisan scorekeeper said in its annual long-term outlook for the federal budget.


Federal debt is expected to rise from 74 percent of GDP now to 106 percent in 25 years, which is 4 percentage points higher than the CBO projected just last year. That’s due chiefly to an overall slower economy, or lower GDP, than previously thought.Scissors-32x32.png


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