Debt to break WWII record by 2031
The nation’s debt burden is on track to surpass its historic high point in a decade, reaching 107 percent of gross domestic product (GDP) in 2031, according to a new report from the nonpartisan Congressional Budget Office (CBO).
The debt surpassed 100 percent of GDP last year for the first time since World War II, when it peaked at 106 percent.
CBO projected that based on current law, the debt would continue to mount, surpassing 200 percent of GDP by 2051.
Economists roundly agree that deficit spending during economic emergencies is good policy, but warn that deficits should be brought under control during sunnier economic times to avoid negative consequences down the road.
“Debt that is high and rising as a percentage of GDP boosts federal and private borrowing costs, slows the growth of economic output, and increases interest payments abroad,” the report said.
“A growing debt burden could increase the risk of a fiscal crisis and higher inflation as well as undermine confidence in the U.S. dollar, making it more costly to finance public and private activity in international markets.”
The costs of servicing the debt alone are set to grow dramatically over time, surpassing discretionary spending on both defense and domestic programs in just over 20 years, and the entirety of Social Security shortly thereafter.
The warnings about major debt increases are playing a role in the debate around President Biden’s $1.9 trillion COVID-19 relief bill.
Treasury Secretary Janet Yellen has repeatedly argued that the risks of spending too much are far lower than the risks of not spending enough and allowing the economy to flounder. That, she says, would both result in a weaker economy and leave the country in a tougher position for addressing the debt.
Republicans argue the price tag is too large and the bill not well-targeted enough to justify because of the economic conditions alone.
“With our nation moving toward a dangerous future of increased inflation, President Biden and Democrats in Congress insist on pushing a wasteful $1.9 trillion ‘COVID’ spending bill that funds liberal priorities while hiking our federal debt to nearly $30 trillion,” Sen. Rick Scott (R-Fla.) said Thursday.
“The partisan actions of Congressional Democrats and the Biden Administration have real life consequences for Americans,” he added.
Democrats are quick to note that the GOP supported a $1.9 trillion tax cut when the economy was already humming along. Under former President Trump, the deficit rose from $666 billion to just shy of $1 trillion, and the debt expanded significantly.
Budget watchdogs, however, say the pandemic should not be an excuse to ignore the debt altogether.
“We shouldn’t shy away from borrowing what’s needed to end this pandemic, support the recovery, and help sustain households and businesses through this crisis,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, calling the report’s findings “an air raid siren.”
“But along the way, we can’t afford to ignore the long term.”