US debt is on track to double the size of the entire economy in the next 25 years, the non-partisan Congressional Budget Office reported Tuesday in its grim view of America’s fiscal future.
The CBO said that under present policy, in which current tax rates are upheld and lawmakers do not curb entitlements, the portion of national debt held by the public would soar from 70 percent of GDP as forecast for the end of 2012 to 100 percent of GDP in just over a decade.
“After that, the growing imbalance between revenues and spending, combined with spiraling interest payments, would swiftly push debt to higher and higher levels,” the CBO said in its 2012 Long-term Budget Outlook.
“Debt as a share of GDP would exceed its historical peak of 109 percent by 2026, and it would approach 200 percent in 2037.”
The campaign of Mitt Romney, the Republican challenging President Barack Obama for the White House in November’s election, said the dire data confirmed the administration was taking the country down a “path to fiscal ruin.”
Democrats countered that it showed that revenue generation, and not just cuts to domestic spending, must be part of any broad plan to rein in debt.
The economy is facing historic pressure in coming decades due to the aging of the US population: the demands of the large “baby-boom” generation — those born between the end of World War II and the early 1960s — will lead to a significant sustained increase in the share of people receiving benefits such as Social Security and Medicare.
But decisions on taxes and spending will also have huge ramifications on future debt levels, said CBO director Doug Elmendorf.
The report maps out two separate trajectories, including the extended baseline scenario in which federal debt would gradually decline over the next quarter century to 53 percent of GDP, thanks to relatively high revenue levels and lower spending on non-health care programs.
“The budget outlook is much bleaker under the alternative fiscal scenario… because revenues would remain at levels similar to those experienced historically, while spending would grow because of aging and rising health care costs,” Elmendorf said in the report.
Spending on health care programs alone would soar, from more than five percent of GDP now to almost 10 percent in 2037, and would continue to increase thereafter, the CBO said.
Such an explosive debt trajectory, forecast under current policies, “underscores the need for large and timely policy changes to put the federal government on a sustainable fiscal course,” the report said.
The latest data was fodder for both Team Romney and congressional Republicans, who say tackling long-term debt is crucial for creating business confidence and hence new jobs.
“Today’s CBO report confirms that President Obama has placed us on a path to fiscal ruin,” Romney’s policy director Lanhee Chen said in a statement.
“Instead of tackling entitlement reform, he has made clear that he has no plan for addressing the challenge,” he added.
“It is immoral to place such a burden on future generations, and Mitt Romney will not allow it to continue” should he become president.
Steny Hoyer, the number two House Democrat, argued that Republican “intransigence” over considering anything other than painful cuts to domestic spending was to blame as Congress seeks to fend off a mounting debt crisis.
“CBO’s report is a warning that we must get our fiscal house in order by achieving big and balanced deficit reduction that includes both spending and revenues,” he said.
“Cutting domestic spending alone won’t work, and it will require both parties working together.”