Federal debt could amount to more than the value of the entire American economy within a few decades.
The latest annual long-term budget outlook report from the Congressional Budget Office, which was released this week, projects this will happen before 2046 if tax laws and spending patterns don’t change.
The CBO is a federal agency that provides analysis and estimates to help members of Congress make budgetary decisions.
The CBO’s latest outlook report compares the federal debt load with the gross domestic product, or GDP, which is considered representative of a nation’s economy. According to the report, federal debt:
- Was equal to 39 percent of GDP as of the end of the 2008 fiscal year.
- Has risen to 75 percent of GDP since the end of the recession.
- Will rise to 86 percent of GDP in 2026.
- Will rise to 141 percent of GDP in 2046.
Federal debt was equal to 106 percent of GDP after World War II, and that mark remains the all-time record — at least for now.
So what’s behind this trend? In short, the federal deficit — the government is spending more money than it’s bringing in.
The CBO says the biggest expenses driving the deficit are:
- Social Security
- Major health care programs (primarily Medicare)
- Interest on the government’s debt
The report explains:
Much of the spending growth for Social Security and the major health care programs results from the aging of the population: As members of the baby-boom generation age and as life expectancy continues to increase, the percentage of the population age 65 or older is anticipated to grow sharply, boosting the number of beneficiaries of those programs.
By 2046, spending on programs for people who are 65 or older is projected to account for about half of all federal noninterest spending.
What’s your take on this news? Would you want tax laws or federal spending patterns to change to address the growing deficit? Share your thoughts below or on Facebook.