What is Driving Up the Debt?

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

The main drivers of increasing debt:  

  1. Erosion of tax revenues due to tax cuts enacted since 2001; 
  2. Growth in entitlement spending due to aging of the population and rising health costs (see graph above); 
  3. Rapidly rising defense spending since 2000, due in part to the Iraq/Afghanistan wars (which by 2014 had already cost $1.5 trillion);  and 
  4. 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.

Long-Term Outlook

Additional Resources on Deficits and Debt