CBO says debt will shrink, then soar

Sept. 17, 2013 at 6:03 PM
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WASHINGTON, Sept. 17 (UPI) -- The Congressional Budget Office said the U.S. debt will decline slightly relative to gross domestic product for several years but will return to current levels.

Releasing a 10-year projection Tuesday, the non-partisan budget office said the debt will decline if current tax and spending laws remain in place but growing deficits will "ultimately push debt back above its current high level," 73 percent of GDP -- the highest percentage ever except for a short time around World War II.

That figure is projected to grow to 100 percent of GDP in 2038, 25 years from now, the report said.

The debt is the total of all accumulated through annual deficits, plus interest and minus whatever gains can be made when the government is able to pay down some of its debt.

The current trajectory can be said to have begun in the years following the 2007-09 recession.

From 2009 through 2012, when the effects of the recession were felt with decreasing tax revenues, higher demand for social services and spending to rescue the economy, the nation's deficits rose as a percentage of economic output, causing the nation's debt to soar.

The CBO projected Tuesday current laws governing taxes and spending would put the deficit at 4 percent of the GDP this year, dropping from a peak of 10 percent in 2009. That is expected to drop to 2 percent of GDP by 2015, while the debt would drop from 73 percent of GDP to 68 percent.

After that, the debt will rise "mainly because of increasing costs and growing spending for Social Security and the government's major healthcare programs," including Medicare, Medicaid, the Children's Health Insurance Program "and subsidies to be provided through health insurance exchanges," the office said.

"Debt would be on an upward path relative to the size of the economy, a trend that could not be sustained indefinitely," the CBO said.

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