Historic debt, budget deficits on the way
New fiscal projections paint a “clearly unsustainable” picture
WASHINGTON – Get ready for the return of trillion-dollar budget deficits and record-high debt.
A report released Friday concludes that recent tax-and-spending legislation passed by Congress is helping to drive up the federal deficit and push the national debt as a percentage of annual economic output to levels not seen since just after World War II.
Trillion-dollar deficits will return permanently by next year — three years earlier than projected — and debt will exceed the size of the economy within a decade, according to the analysis by the non-partisan Committee for a Responsible Federal Budget.
“These projections show a fiscal situation that is clearly unsustainable,” concludes the report, a copy of which was obtained by USA TODAY.
The $1.5 trillion tax-cut package that Congress passed in December and the $400 billion budget bill approved last month aren’t the sole reasons for the increase but have “turned a dismal fiscal situation into a dire one,” the report says.
“Revenue is lower, spending is higher, deficits are larger and the national debt is rapidly headed toward a new record,” the report says.
The federal budget deficit — the annual amount by which government expenses exceed revenues — will climb to $1.1 trillion in 2019, up from $665 billion in 2017, and will hit $1.7 trillion by
2028, according to the report. Previous projections showed trillion-dollar deficits returning in 2022 and projected a
$1.5 trillion deficit by 2028.
The national debt — the accumulation of those annual deficits — will hit
$29.4 trillion by 2028, or roughly 101% of the gross domestic product, which is the value of all goods and services produced in the country during a given year, the report projects. That is within
5 percentage points of the record set in
1946, just after World War II, the report
“This is really perhaps the most fiscally irresponsible period of recent history.” Maya MacGuineas President of Committee for a Responsible Federal Budget
notes. And it is up from $14.7 trillion at the end of 2017, or 76% of the GDP.
The deficits and debt will be even worse if temporary spending increases and tax cuts are made permanent, the report warns.
Under that scenario, the deficit would total $2.4 trillion by 2028. The debt would hit $33 trillion by 2028, or 113% of the GDP, exceeding the 1946 record. Debt likely will continue to grow rapidly and could be twice the size of the economy in about 25 years, the report concludes.
What’s more, rising debt and interest rates means that interests costs will be the fastest-growing part of the budget, the report says.
Under current law, interest is projected to grow from $263 billion in 2017 to $965 billion by 2028, which would make it 14% of the budget, the report says. If the spending increases and tax cuts are made permanent, annual interest costs will exceed $1 trillion (3.6% of GDP), which would mean the country will be spending more on interest than on defense or Medicaid, the report said.
The high debt will most likely crowd out productive investment, slow wage growth and could increase the likelihood of an eventual fiscal crisis, the report says.
“This is really perhaps the most fiscally irresponsible period of recent history,” said Maya MacGuineas, the committee’s president.
A combination of spending reductions, revenue increases and reform of entitlement programs, such as Medicare, Medicaid and Social Security, will be needed to reverse the trilliondollar deficits and record-setting debt, the report says.