Okay in the massive field of candidates running for president, who is talking about running out of money?
CBO projects that if the debt limit is unchanged, the measures that the Treasury has been taking to avoid breaching that limit will be exhausted sometime between mid-November and early December, and the Treasury will then run out of cash.
Summary
The debt limit—commonly referred to as the debt ceiling—is the maximum amount of debt that the Department of the Treasury can issue to the public and to other federal agencies. That amount is set by law and has been increased over the years in order to finance the government’s operations. In March, the debt ceiling was reached, and the Secretary of the Treasury announced a “debt issuance suspension period.” During such a period, existing statutes allow the Treasury to take a number of “extraordinary measures” to borrow additional funds without breaching the debt ceiling. The Congressional Budget Office projects that if the debt limit remains unchanged, those measures will be exhausted and the Treasury will run out of cash between mid-November and early December. At such time, the government would be unable to fully pay its obligations, a development that would lead to delays of payments for government activities, a default on the government’s debt obligations, or both.
According to the Congressional Budget Office’s estimates, this year’s deficit will be noticeably smaller than what the agency projected in March, and fiscal year 2015 will mark the sixth consecutive year in which the deficit has declined as a percentage of gross domestic product (GDP) since it peaked in 2009. Over the next 10 years, however, the budget outlook remains much the same as CBO described earlier this year: If current laws generally remain unchanged, within a few years the deficit will begin to rise again relative to GDP, and by 2025, debt held by the public will be higher relative to the size of the economy than it is now.
CBO’s economic forecast, which serves as the basis for its budget projections, anticipates that the economy will expand modestly this year, at a solid pace in calendar years 2016 and 2017, and at a more moderate pace in subsequent years. The pace of growth over the next few years is expected to reduce the quantity of underused resources, or “slack,” in the economy, lowering the unemployment rate and putting upward pressure on compensation as well as on inflation and interest rates.
The Budget Deficit for 2015 Will Be Smaller Than Last Year’s
At $426 billion, CBO estimates, the 2015 deficit will be $59 billion less than the deficit last year (which was $485 billion) and $60 billion less than CBO estimated in March (see table below). The expected shortfall for 2015 would constitute the smallest since 2007, and at 2.4 percent of gross domestic product, it would be below the average deficit (relative to the size of the economy) over the past 50 years. Debt held by the public will remain around 74 percent of GDP by the end of 2015, CBO estimates—slightly less than the ratio last year but higher than in any other year since 1950.
Outlays
Federal outlays are projected to rise by 5 percent this year, to $3.7 trillion, or 20.6 percent of GDP. That increase is the net result of a nearly 10 percent jump in mandatory spending, offset by lower net interest payments and discretionary outlays.
CBO anticipates that mandatory outlays will be $199 billion higher in 2015 than they were last year. Federal spending for the major health care programs accounts for a little more than half of that increase: Outlays for Medicare (net of premiums and other offsetting receipts), Medicaid, the Children’s Health Insurance Program, and subsidies for health insurance purchased through exchanges and related spending are expected to be $110 billion (12 percent) higher this year than they were in 2014.
In addition, outlays related to the government’s transactions with Fannie Mae and Freddie Mac and for higher education programs will be greater than the amounts recorded last year. Those increases will be partially offset by increased receipts from auctions of licenses to use the electromagnetic spectrum and by reduced spending for unemployment compensation.
Even though federal borrowing continues to rise, CBO expects that the government’s net interest costs will fall by nearly 5 percent this year—mainly because lower inflation this year has reduced the cost of the Treasury’s inflation-protected securities.
CBO anticipates that discretionary spending, which is controlled through annual appropriations, will be about 1 percent less in 2015 than it was in 2014. By the agency’s estimates, defense outlays will drop by more than 2 percent, whereas nondefense discretionary outlays will be only slightly below last year’s amount.
Revenues
Federal revenues are expected to climb by 8 percent in 2015, to $3.3 trillion, or 18.2 percent of GDP. Revenues from all major sources will rise, including individual income taxes (by 10 percent), corporate income taxes (by 8 percent), and payroll taxes (by 4 percent). Revenues from other sources are estimated to increase, on net, by 5 percent. The largest increase in that category derives from fees and fines, mostly as a result of provisions of the Affordable Care Act. Many more details here.
