Jul 12, 2016

New Analysis: CBO Underestimates Looming Debt Crisis in Long-Term Report

Post by Derek Yale

The Bankrupting of America is Just 15 Years Away

Arlington, VA – Freedom Partners Institute today released a comprehensive analysis of long-term national debt that includes trillions of dollars owed by the federal government that were ignored by CBO in its Long-Term Budget Outlook released earlier today.

Though CBO paints a bleak picture of our economic future, it ignores some of the biggest drivers of debt and underestimates the rapid rate at which we’re heading toward a debt crisis.
Where do the CBO numbers fall short?
The CBO long-term projections provide information on what is known as public debt, which is a measure of all federal securities sold to the “public,” i.e. any investors outside the federal government. But it ignores intragovernmental debt, the money the federal government owes to itself to pay for programs such as Medicare, Social Security, and other entitlement programs that have promised payouts to recipients in the years ahead. Currently, intragovernmental debt accounts for almost 28 percent of gross debt, which takes into account these programs and all other intragovernmental debt.

Using CBO’s own modeling to estimate long-term gross debt, Freedom Partners Institute reveals that the United States is headed toward bankruptcy faster than CBO’s Long-Term Outlook indicates.
Freedom Partners Institute’s analysis shows that in just 15 years, the national gross debt will nearly double—from $19.3 trillion this year to an overwhelming $37.8 trillion—and America’s debt-to-GDP ratio will be on par with places like Greece and Argentina when they faced sovereign debt crises.


Freedom Partners Chamber of Commerce Senior Policy Advisor Andy Koenig issued the following statement:
“The CBO report only tells half the story of America’s fiscal future. The Freedom Partners Institute’s projections show that we are on an accelerated path to bankruptcy—with an economic fate similar to countries like Greece and Argentina, being devastated by massive debt, unemployment, and higher costs. Ultimately, hardworking Americans will pay the price for imminent bankruptcy, with more people in poverty and less opportunity. Only when Congress quits its chaotic system of crisis budgeting and reckless spending can we put our long-term fiscal trajectory on more stable footing.”
Freedom Partners Chamber of Commerce recently announced the Stop, Cut & Fix congressional spending and appropriations plan, a first step to end Congress’ cycle of crisis budgeting and overspending to help slow the growth of the government’s national debt.
Summary of Methodology
The Freedom Partners Institute report uses the CBO’s 10-year budget projections (released in March 2016) to find the projected ratio of debt held by the public to gross debt over those years. Freedom Partners Institute then applied the most forward-looking ratio that CBO provides—81 percent—to the CBO’s long-term estimates of debt held by the public (converted to dollars), and calculated total gross federal debt, by year, from 2016-2050.