CBO: Federal debt to pass historic high in 2035

CBO: Federal debt to pass historic high in 2035

The United States is less than two decades away from exceeding its highest recorded level of federal debt, according to the non-partisan Congressional Budget Office (CBO).

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The CBO projects that U.S. federal debt will pass 106 percent of the country's gross domestic product (GDP) by 2035, in its second long-term budget outlook report of 2016. That level was recorded once before, in 1946, shortly after World War II. 

The current federal debt is worth 75 percent of the country's GDP. It’s expected to reach 86 percent by 2026, and 141 percent by 2046.

Ballooning federal debt raises questions about U.S. economic stability and the country's capacity to pay its loans. If left unchecked, that debt could trigger a national or international economic crisis, according to the CBO.

“No one can confidently predict whether or when such a fiscal crisis might occur in the United States," the CBO said. “The debt-to-GDP ratio has no identifiable tipping point to indicate that a crisis is likely or imminent.” 

“However, the larger a government’s debt, the greater the risk of a fiscal crisis," the CBO report added.

To stabilize debt at the current level compared to the GDP, lawmakers would need to reduce spending or raise revenues by 1.7 percent of the GDP. That's roughly $330 billion in 2017, or $1,000 for every U.S. resident.

The CBO projected in January that the deficit would rise by $544 billion, $105 billion more than in 2015. The current deficit is roughly 2.9 percent of the GDP, the highest level since it peaked at 8.9 in 2009. 

The CBO has increased its debt projections 2015, due in part to rising Social Security and healthcare program costs. Those programs will account for half of non-interest U.S. spending by 2046.

Budget hawks had stark warnings after the report's release and called on presidential candidates to address entitlement reform.

"This trajectory cannot continue. It is a virtual roadmap to financial peril," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. 'The presidential candidates should step up and address our dangerous long-term debt trajectory with constructive solutions and real leadership, not continuing to duck these challenges as they have so far."