Reps. Claudia Tenney, R-N.Y., and Lloyd Smucker, R-Pa., discuss efforts to free the economy on ‘Kudlow.’
Non-partisan Congressional Budget Office (CBO) released its latest 10-year budget and economic outlook on Friday that showed the federal government is on track to break the debt record set nearly 80 years ago.
The CBO outlook shows that, as a percentage of gross domestic product (GDP), or compared to the size of the U.S. economy, federal debt in public holdings is on track to increase from 98% of GDP at the end of fiscal year 2024 to 107% of GDP in fiscal year 2029.
At that point, the public debt would not only exceed the size of the US economy, but also surpass the current debt record of 106% of GDP set in 1946, when the US began the process of demobilization after the conclusion of the world war. It is projected to continue growing and reach 118% of GDP in 2035.
“From 2025 to 2035, the debt rises as increases in spending on Social Security, Medicare and interest payments outpace income growth,” CBO Director Phillip Swagel told reporters.
THE FEDERAL DEFICIT CONTINUES TO GROW, AND THE CONGRESSIONAL BUDGET OFFICE HAS SOLUTIONS
The US reached its debt ceiling on Thursday, raising fears of a possible bankruptcy. (FOX Business / Fox News)
The federal government is projected to have $1.9 trillion at its disposal budget deficit in fiscal year 2025. The deficit is projected to narrow briefly over the next two years before continuing to widen to more than $2 trillion in fiscal year 2030 and reaching $2.7 trillion in fiscal year 2034.
The temporary reduction in the size of the deficit is partly due to the expected expiration of parts in 2017. tax reduction at the end of this year according to the current law, which led to an increase in tax revenues. Although Congress and the new Trump administration may pass new legislation expanding those provisions.
CBO’s analysis is based on current law, so changes in federal tax and spending policies could change those numbers.
WHAT WERE THE LARGEST BUDGET DEFICITS IN US HISTORY?
Much of the growth in the deficit is a consequence increased consumption on entitlement programs such as Social Security and health care as the American population continues to age and the increased costs of servicing the larger national debt at a time of rising interest rates.
Spending on Social security it is projected to rise from $1.5 trillion in fiscal 2025 to $2.6 trillion in fiscal 2035, while Medicare spending is expected to rise from $942 billion to $1.7 trillion over that period. The cost of paying interest on the national debt is rising from a projected $952 billion this fiscal year to more than $1.7 trillion over the next decade.
Swagel also noted that the Social Security Trust and Survivors Trust Fund is projected to be depleted in 2033, the same year CBO’s most recent analysis projected last June.
When that trust fund is depleted, Social Security recipients would, by law, have their benefits automatically cut to match payroll tax revenue, which an analysis by the nonpartisan Committee for a Responsible Federal Budget (CRFB) found would result in Reduction of social benefits by 21%..
US NATIONAL DEBT SET NEW RECORD: $36 TRILLION
“A fiscally weak country cannot remain a strong country for long,” CRFB President Maya MacGuineas said in a statement. “The United States has built up a dangerous mountain of debt simply because our political leaders are unwilling to do the hard work of responsible governance and acting as fiscal stewards of the country.
“They chose to borrow at record levels rather than admit that part of the budget has a plan to pay the bills despite the incredible damage they continue to do to the country as the debt grows,” she added. “As today’s report shows, our debt is at near-record levels not seen since World War II, we will spend more on interest than on any other program except Social Security, and Social Security will become insolvent in less than a decade.”
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Michael Peterson, executive director of the nonpartisan Peter G. Peterson Foundation, said, “By any definition, we are on an unsustainable fiscal path. We are currently on track to add $22 trillion to our national debt over the next ten years, including $14 trillion spent just on interest costs In ten years our debt will grow to a staggering 118% of our entire economy.
“Today’s report presents a frightening outlook, but the good news is that there are many policy solutions to address our fiscal challenges,” Peterson added. “As we approach Inauguration Day, our leaders have a new opportunity to secure America’s economic future by putting us on a stronger, more sustainable fiscal path.”
