In CBO’s analysis, the ranges of variation for the four factors were based on the historical variation in their 25-year averages, as well as on consideration of possible future developments; together, those offer a guide (though admittedly an imperfect one) to the amount of uncertainty that surrounds projections of the factors over the next 25 years.
The budgetary effects of varying the individual factors differ widely. The simulated variations in productivity, interest rates, and Medicare and Medicaid spending have large effects on the budget within 25 years, whereas the simulated variation in mortality rates does not. In particular:
- In cases in which only one of those factors varies from the values used for the extended baseline, CBO’s projections of federal debt held by the public in 2039 range from about 90 percent of gross domestic product (GDP) to 135 percent, compared with 111 percent under the extended baseline including the economic effects of future fiscal policies.
- In a case in which all four factors varied simultaneously so as to increase projected deficits, but they vary only half as much as in the individual cases, federal debt held by the public in 2039 would reach about 160 percent of GDP (see the figure below). Conversely, in a case in which all four factors varied in a way that lowered deficits, debt in 2039 would equal 75 percent of GDP, about what it is now.
Those projected levels of debt are all high by historical standards, and a number of them exceed the peak of 106 percent of GDP that the United States reached at the end of 1946.