CBO projects a decade of trillion-dollar deficits and soaring US debt
The federal deficit is projected to keep rising over the coming decade, driving US debt to the highest level since World War II over the next 10 years, according to a Congressional Budget Office report released Tuesday.
The annual congressional report projects that the US budget deficit is likely to blast through the symbolic threshold of $1 trillion this year despite a healthy economy with record low unemployment.
And that number is expected to widen each year over the next decade through 2030. As a result of the rising deficits, US government debt held by the public will soar from nearly $18 trillion at the end of 2020 to $31.4 trillion by the end of 2030.
Over that same period, that debt held by the public as a share of the economy will grow from 81% of GDP this year to 98% by 2030 — the highest percentage since 1946.
The CBO warned that rising federal debt would likely reduce national savings and income, boost the government’s interest payments, limit policymakers’ ability to respond to unforeseen events and increase the likelihood of a fiscal crisis.
“Today’s CBO report shows 10 straight years of trillion-dollar deficits,” said Michael Peterson, CEO of the Peter G. Peterson Foundation. “That’s a sad reflection of our nation’s poor fiscal health, and it adds insult to injury that we’re piling on all this debt in a growing economy.”
The widening gap comes despite 2016 campaign promises by President Donald Trump to shrink or even eliminate the nation’s deficit. But it has continued to climb upwards due in part to the 2017 tax cuts and a two-year budget deal that included increases in federal spending.
Big budget deficits typically grow during economic downturns — but the US economy is expanding and unemployment is at a 50-year low.
“Not since World War II has the country seen deficits during times of low unemployment that are as large as those that we project,” said CBO Director Phillip Swagel.
The CBO estimated that the US economy would grow by 2.2% this year, modest growth but far less than Trump’s goal of hitting 3% annual growth.
The deficit — the gap between how much the government spends versus how much it takes in — is now expected to rise from 4.6% of gross domestic product this year to 5.4% in 2030.
Other than a six-year period during and after World War II, the United States has never crossed that threshold of 4% GDP for more than five consecutive years. Over the past 50 years, deficits have averaged 1.5% especially when the economy is relatively strong, as it is today.
“We’re running trillion-dollar deficits while the economy is expanding — when are lawmakers going to wake up?” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “Ignoring what is staring us right in the face is fiscal malfeasance.”
The CBO forecast assumes that Congress will stay the course on its current spending plans.
