1. In 2026, federal spending on mandatory programs and interest on the debt will consume more than 98% of all revenues. As the population ages and more Baby Boomers retire, spending on mandatory programs, like Social Security and Medicare, will rise dramatically.[1] As the national debt increases and interest rates rise, net interest expense will also increase. By 2026 government spending on mandatory programs and interest will consume nearly all of federal revenue, leaving government spending on all other programs, including national defense, to be financed entirely by borrowed money, further increasing the debt.[2]
2. The debt will reach an all-time high in 2035. In less than two decades the debt-to-GDP ratio will surpass its peak that occurred at the end of WWII and it will continue to grow thereafter. By 2046 the ratio will be 141%, over three-and-a-half times the average of the last five decades, with a continued upward trajectory beyond 2046.[3] Should we allow our debt to balloon to such dangerous levels, it will weaken the U.S. economy and stifle national savings and wages. Debt levels of this magnitude will also increase the likelihood of a financial crisis and will make it much harder for policymakers to respond to such a crisis.
"High and rising federal debt would reduce national saving and income in the long term; increase the government's interest payments, thereby putting more pressure on the rest of the budget; limit lawmakers' ability to respons to unforseen events; and increase the likelihood of a financial cirsis."-- Congressional Budget Office |
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3. More than half a trillion dollars must be cut annually, just to return the debt-to-GDP ratio to its 50-year average. Over the past 50 years the ratio of debt to GDP averaged 39%. To return to that level by 2046 the government must decrease spending or increase revenue each year by 2.9% of GDP; in 2017 that represents $560 billion annually. If policymakers chose to target a ratio of 75% (the current debt-to-GDP ratio) by 2046, then they would need to reduce the deficit by 1.7% of GDP, which in 2017 would be $330 billion each year.[4]
4. Postponing corrective action requires more drastic solutions in the future. The longer Congress and the Administration wait to tackle the looming debt crisis, the more painful the choices and consequences will be. Debt will rise to such unsustainable levels that action is unavoidable. Delaying those policy changes needed to reduce our debt will only worsen the impact on the economy and the American people. If policymakers wait until 2022 to begin addressing the debt and deficit, they will need to reduce spending or increase revenue by $800 billion annually to return to the 50-year average by 2046. If the government failed to act for ten years then the deficit reductions would need to be nearly $1.2 trillion annually.[5]
5. We have a spending problem, not a revenue problem. The 50-year average of federal revenue to GDP is 17.4%, in 2015 it was 18.3%, and by 2046 it will increase to 19.4%. The 50-year average of federal spending to GDP is 20.2%; in 2015 was 20.7% of GDP and will grow to more than 28% by 2046. Thus, federal deficit and debt problems are not due to a lack of revenue, but rather continual growth in spending.[6]
Read the full report at: https://www.cbo.gov/publication/51580.
[1] “The 2016 Long-Term Budget Outlook,” Congressional Budget Office, July 2016, p 16.
[2] “Updated Budget Projections: 2016 to 2026,” Congressional Budget Office, March 2016, Table 1.
[3] “The 2016 Long-Term Budget Outlook,” p 7.
[4] p 12.
[5] “The 2016 Long-Term Budget Outlook,” p 14 and “Updated Budget Projections: 2016 to 2026, Table 1.
[6] “The 2016 Long-Term Budget Outlook,” p 10, 15 and the Budget of the United States, Historical Table 1.2.
