The economy is cooling, but America is a frog in hot water.

We've all heard that if you put a frog in boiling water, it will jump out, but if you put a frog in hot water and slowly turn up the heat, it will stay there until it boils and dies. That may or may not be true, but this is an example of how incremental changes, if ignored, can accumulate to dangerous, even fatal levels. This is a useful fable to illustrate.

As I read “Budgets and Economic Outlook: 2024 to 2034,” released by the Congressional Budget Office (CBO) last week, I thought of the unfortunate frog. Over the next 10 years, the deficit will gradually increase from 5.6% of gross domestic product (GDP) to 6.1% under current law. To put this in context, the average deficit over the past 50 years has been his 3.7% of GDP.

Meanwhile, the government debt held by the people is expected to increase from 99% of gross domestic product (GDP) this year to 116% in 2034, more than double the 50-year average, and the This far exceeds the previous record set in 1946.

The water gets hot and we turn into frogs.

This didn't have to happen. If you look back at the beginning of this century, the water wasn't that hot. The budget was in surplus, and the debt amounted to 31.5% of GDP, less than a third of the current level, let alone future projections.

As the water temperature steadily rose, we missed all opportunities to jump freely. It is now fair to ask whether we have waited too long.

The answer to this question depends on whether Congress, future presidents, and the American people understand three basic facts about the current situation.

Broader spending restraints are needed. Efforts to control spending must go beyond annual spending (i.e., “discretionary” spending). You should also include common “essential” programs related to retirement and health care, such as Social Security, Medicare, and Medicaid. These programs, along with interest on debt, encourage increased spending.

Under current law, CBO projects that mandatory spending and net interest will increase by 2.0% of GDP over the next 10 years, while discretionary spending will contract by 1.1%. CBO expects all revenue to be consumed in mandatory spending and debt interest as early as next year.

To put it more harshly, Congress can be abolished. Discretionary spending, including on defense, is planned for 2025, but there remains a deficit. Unless we cast a wider net to reduce spending, fiscal policy will continue on an unsustainable path.

I need more income. Future revenue needs will be higher than in the past due to aging populations, rising healthcare costs, and increasing costs of servicing accumulated debt. Over the past 50 years, income has averaged 17.3% of GDP. However, it is worth noting that in the last four years of budget surpluses (1998-2001), revenues averaged 19.3% of GDP, two percentage points above the 50-year average.

Over the next decade, CBO projects that revenue will rise gradually from 17.5% of GDP this year to 17.9% by 2034. However, this assumes that the tentative tax cuts enacted in 2017 will take effect after 2025. Some, if not all, of these expiring tax cuts are likely to be extended, leaving revenues essentially flat and the deficit even larger than expected.

If a few years ago, before baby boomers started qualifying for Social Security and Medicare and debt servicing costs were much lower, it would have taken revenues in excess of 19 percent of GDP to balance the budget. It's hard to believe that we would do that. At least in the future you won't need that much. Putting the budget on a sustainable path will require greater revenue contributions, in addition to necessary spending restraints.

We need more workers. High economic growth will help support rising debt burdens, but future growth will be constrained by slowing potential labor force growth, and the CBO expects growth in the coming 10s as the population ages and birth rates remain low. Labor force growth is expected to decline by about two-thirds over the year. CBO estimates that after 2034, “net immigration will increasingly drive population growth, accounting for all population growth beginning in 2040.” In other words, by 2040 there will be more deaths than births in the United States.

Largely due to these demographic constraints, CBO projects that annual real GDP growth will decline to just 1.5% by the 2040s. By comparison, his annual rate from 1993 to 2022 was 2.4%. Unless we find ways to increase labor force growth, such as through immigration, future economies will become increasingly unable to cope with growing debt burdens.

All of the above requires difficult trade-offs and a high degree of bipartisan cooperation. We either suck it up and do so, or we stay put and boil to death, like the frog in the allegory.

Robert L. Bixby is executive director of the Concord Coalition.