World News – GB – CBO predicts that the national debt will be twice that of the economy Beware of higher taxes

It’s hard to overstate the dismal fiscal future predicted by the Congressional Budget Office In its new long-term budget estimate, CBO predicts that in just 30 years, the national debt will increase to almost twice the total US economic output, down from less than 80% last year

As a proportion of gross domestic product (GDP), federal debt is already as high as it was at the height of WWII And CBO predicts it will double again by 2050 Worse yet, his forecast assumes Congress will not enact another big pandemic-related stimulus bill (it likely will), and that it will allow many of the tax cuts in the 2017 tax cuts act. ‘tax and employment expire on time in 2025 (it probably won’t)

If the most likely, but most pessimistic, assumptions prevail instead, debt will grow to 25 times the size of the economy, according to Committee for a Responsible Federal Budget analysis Even in the bill’s projection current more conservative CBO, we will be a fiscal Greece, but with less food and less sun

How is it going? It’s really simple Continuing the recent trend, the federal government is expected to spend more and more money as a share of the economy – a big chunk of it on Social Security and health care – even though the amount of income it absorbs increases much more slowly

For example, in fiscal 2019, before the pandemic, the federal government spent around 21% of GDP, while it raised around 163% in taxes and other revenues Under current law, CBO predicts that by 2030 spending will rise to 231% of GDP while revenues rise to 178% According to more realistic CRFB projections, spending will rise to 24% of GDP while income will remain almost stable at 16 %6 percent

By 2050, CBO predicts spending will rise to 312 percent of GDP, even under current law, as revenues reach only 186 percent The annual federal budget deficit – the gap between expenditure and revenue – would almost triple from 46 percent of GDP to 126 percent According to the more realistic CRFB assumptions, this annual budget gap would widen to a staggering 165 percent of GDP, or nearly 1/6 of the total economic output of 2050

Since these numbers are relatively insignificant to normal humans, CBO tried to make them real. He believes that with so much money going to finance public debt rather than finance private trade, the economy will grow about 02 percentage points per year slower than if federal debt remained at pre-COVID-19 levels By 2050, gross national product (GNP) is expected to be more than 6 percent lower, an equal deficit at about $ 6,300 per person per year in today’s dollars

One reason is that a lot of money will be diverted to pay interest on debt, much of which is held by foreign investors The United States is putting itself in the position of a gambling addict who is constantly borrowing to the local loan shark More and more income goes to pay for vigor – interest – leaving less and less for immediate consumption or long-term investment And with less investment, future economic growth inevitably slows. p>

The United States was extremely lucky the last time it racked up massive debt After World War II it dominated the global economy With the rise of manufacturing and the return of IGs to work, the country was able to repay many of these recognitions of war – and it took almost two more decades to bring the national debt down to its pre-war level

We probably won’t be so lucky this time The US economy no longer dominates the world Our workforce, a key engine of economic growth, continues to grow as the massive baby boom generation takes his retirement and dies Maybe a new surge in technological productivity will save us Maybe the proponents of modern monetary theory are right and the government can finance its debt indefinitely by printing money, without causing inflation

Otherwise, the United States could head into a period of significantly higher taxes and cutbacks in government spending The timing of this is not predictable, but could be triggered by a future rate hike. ‘interest But debt that’s twice the size of the economy seems, uh, unlikely

As the late economist Herb Stein put it, « if current trends can’t continue, they won’t » Or maybe it was « if something can’t go on indefinitely, it will stop » Either way, I bet that in the medium term, federal taxes will rise as the country is forced to deal with ever-growing national debt

I am the author of the book « Caring for Our Parents » and a senior fellow at The Urban Institute, where I am affiliated with the Tax Policy Center and the Retirement Program

I am the author of the book « Caring for Our Parents » and a senior fellow at The Urban Institute, where I am affiliated with the Tax Policy Center and the Program on Retirement Policy. I also write a blog on fiscal and fiscal policy , TaxVox, which you can read on Forbescom or at http: // taxvoxcentre de politique fiscalorg / Before joining Urban, I was a senior correspondent in the Washington office of Business Week

Congressional Budget Office, Debt, Finance, United States National Debt