The Cost of Politicians and Bureaucrats Doing Business as Usual

The Congressional Budget Office analyses the long-term impact of the U.S. government’s fiscal policies every year. Almost every year, the outlook for the government’s fiscal state gets worse and worse.

2025 is no different. The CBO’s Long-Term Budget Outlook: 2025 to 2055 provides a thirty year window of alarming projections for the federal government’s deficits and debt.

The most important thing to know about the CBO’s projections is they’re based on current law. They assume every tax cut with an expiration date expires. They assume there will never be new spending for anything we do not already know about today. They assume there will never be another recession that tanks revenues while blowing up spending.

They assume Washington D.C.’s politicians and bureaucrats will be able to continue doing business exactly the way they have been. And they will continue doing business that way forever.

This means the CBO’s projections are very much like a best-case scenario. But the long-term budget outlook is dismal even when viewed through the rosiest of rosy-colored glasses.

How Dismal Is It?

The CBO’s analysts summarize the U.S. government’s fiscal outlook in Figure 1-1 of the report. This figure illustrates that neither the national debt nor the government’s annual budget deficits are moving in a sustainable direction.

The two graphs together reveal the problem. The CBO projects that net interest owed on the national debt will drive the government’s annual budget deficits higher year after year, increasing the national debt. The amount the government has to borrow is directly tied to its excessive spending. When interest rates were low, politicians and bureaucrats could afford to spend almost whatever they wanted because it was cheap to borrow.

But now that inflation has inflated interest rates, past excessive spending is becoming very costly. Without serious fiscal reform, the problem gets worse and worse. The accumulated national debt becomes a crushing burden.

What the CBO Predicts

What do the CBO’s budget analysts say about this unsustainable fiscal situation? Here is their summary of the problems that arise from letting politicians and bureaucrats keep doing their budget business as usual:

If federal debt held by the public kept growing faster than GDP, as CBO projects it would under current law, it would have far-reaching implications for the nation’s fiscal and economic outlook. That large and growing debt would have many consequences, including the following:

• Borrowing costs throughout the economy would rise, reducing private investment and slowing the growth of economic output.
• Rising interest costs associated with federal debt would drive up interest payments to foreign holders of that debt and thus decrease national income.
• The United States’ fiscal position would be more vulnerable to an increase in interest rates, because the larger debt is, the more an increase in interest rates raises debt-service costs.
• The risk of a fiscal crisis—that is, a situation in which investors lose confidence in the value of the U.S. government’s debt—would increase. Such a crisis would cause interest rates to rise abruptly and other disruptions to occur.
• The likelihood of other adverse outcomes would also increase. For example, expectations of higher inflation could erode confidence in the U.S. dollar as the dominant international reserve currency.
• Lawmakers might feel constrained from using federal tax and spending policies to respond to unforeseen events or for other purposes, such as to promote economic activity or strengthen national defense.

Additional concerns include a slowdown in economic growth, rising interest rates, and a national currency that depreciates more quickly. Furthermore, there is the risk of a government being unable to adequately respond to a national crisis. None of these things is a good outcome. All of these things are expected in the CBO’s optimistic outlook.