New CBO Projections Show Weaker Economic Growth -- Update
September 21 2020 - 2:50PM
Dow Jones News
By Kate Davidson
WASHINGTON -- The federal government has the capacity to borrow
more if Congress chooses, despite high and rising federal debt,
Congressional Budget Office Director Phillip Swagel said
Monday.
The agency released new projections showing weaker economic
growth and significantly higher federal debt over the next 30 years
than it forecast in June 2019, the last time it released long-term
economic projections and before the coronavirus pandemic swept
across the U.S., triggering a deep recession.
Although the long-term fiscal challenges are daunting, Mr.
Swagel said, "the U.S. is not facing an immediate fiscal
crisis."
"The current low interest rates indicate that the debt is
manageable for now and that fiscal policy could be used to address
national priorities, if the Congress chose to do so," he said in a
statement accompanying the new projections.
The projections released Monday are an extension of forecasts
the CBO released over the summer, showing debt as a share of the
economy is on track to hit 100% next year and reach 108.9% by the
end of the next decade, the highest since World War II.
Debt as a share of gross domestic product will hit 195% by 2050,
the CBO said, 45 percentage points higher than it projected in June
2019. The increase is due in large part to surging federal outlays
to combat the pandemic, followed in later years by rising interest
costs on the federal debt and higher spending on safety-net
programs such as Social Security and Medicare.
The agency also expects slower growth over the coming decades as
the U.S. crawls out of the downturn brought on by the pandemic,
which triggered business shutdowns that led to millions of layoffs.
The CBO now sees average annual GDP growth of 1.6% from 2020 to
2050, roughly a quarter percentage-point less than it expected last
year, and more than a full percentage point lower than the 2.5%
average from 1990 to 2019.
The nation's widening budget gap is at the center of a debate
over how much more spending is needed to support a recovery from
the pandemic, which sent the U.S. into a recession in February.
Democrats have called for another sweeping aid package, which they
say is essential to help the U.S. avoid a prolonged, lackluster
recovery similar to the years following the 2007-09 recession.
Republicans say policy makers need to keep rising debt in check and
called for a narrower bill with targeted aid.
Write to Kate Davidson at kate.davidson@wsj.com
(END) Dow Jones Newswires
September 21, 2020 14:35 ET (18:35 GMT)
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