Source: Congressional Budget Office, March 2017
Current Debt Level:
Deficits Returning to $1 Trillion/Year; and Total Debt Approaching 100% of GDP within a decade
- CBO says Tax Act will increase public debt to 97.5 percent of GDP.
- CRFB projects return of trillion dollar annual deficits.
The main drivers of increasing debt:
- Erosion of tax revenues due to tax cuts enacted since 2001;
- Growth in entitlement spending due to aging of the population and rising health costs (see graph above);
- Rapidly rising defense spending since 2000, due in part to the Iraq/Afghanistan wars (which by 2014 had already cost $1.5 trillion); and
- Rapidly rising interest payments due to growth in the public debt.
Consequences of the growing public debt:
- Increase the likelihood of a fiscal crisis, an occurrence in which investors become unwilling to finance a government’s borrowing unless they are compensated with very high interest rates;
- Limit lawmakers’ ability to respond to unforeseen events;
- Reduce national saving and income; and
- Increase the government’s interest costs, putting even more pressure on the rest of the budget.
- CBO: 2017 Budget and Economic Outlook
- CBO Long-Term Budget Outlook March 30 2017
- July 2016: Index of Fiscal Democracy shows federal revenues on track to being completely consumed by entitlements and interest by mid-2020s
- June 2016: CBO Director’s Presentation on the Budget Outlook
- US Debt Analysis: June 2016
- CBO Budget Infographic
- GAO: Federal Fiscal Outlook
- Domenici-Rivlin Deficit Reduction Plan
- Simpson-Bowles Commission Report