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CBO still showing record debt as a percentage of GDP approaching

July 16, 2014

Last fall did a post looking at the CBO’s 2013 Long_Term Budget Outlook report; specifically at the deficit and debt as a percentage of GDP. At that time I noted the following:

The most noteworthy finding from this report is that “Federal debt held by the public is now about 73 percent of the economy’s annual output, or gross domestic product (GDP).” Only once has the United States had debt at such high levels, and that was during World War II when all resources were being redirected to the military-industrial complex. It is also worth noting the current level is more than double the debt level of 2007. These levels simply cannot be sustained for the country to stay fiscally sound. If these projects hold it will make the previous records set during WWI look like a little ‘blip’.

Things aren’t looking any better than they were a year ago. The CBO has released the 2014 Long-Term Budget Outlook. As expected, very little has changed over the last year. Two charts I showed last year showing federal deficit and federal debt as a percentage of GDP have been combined into one nifty depressing chart by the CBO:

Chart Source: CBO

Chart Source: CBO

Between now and 2039 the deficit (difference between spending and revenues) will continue to increase and the debt held by the public will become larger than the GDP itself. By 2039 it is expected federal spending will be 26% of GDP.

The two big areas for growth on spending are in Major Health Care Programs and Net Interest. This is reflected in the chart below:

Chart Source: CBO

Chart Source: CBO

By 2039 the federal government will be paying almost as much for the Net Interest on the national debt as it spends on Social Security now. I find it mind-boggling that so many politicians on the left and right seem to be OK with creating so much debt for future generations.

It is also wort looking at the federal spending on the Major Health Care Programs. Proponents of Obamacare often make the case that the program will ‘save money’ over the long term. I’m not really seeing that reflected in the CBO’s projection.

Luckily this projection is based upon current laws. Congress can make changes to reverse this course. I don’t think it is likely to happen this election cycle; especially since we have a President that has double-downed on Bush’s spending binges. But in a few more election cycles maybe the country can get a couple more fiscal conservatives in DC. Then there might be a chance (albeit a small one) that Congress and the President will actually work to get rid of the deficit and reduce the debt. If that doesn’t happen… well. I would recommend everyone invest in some alternative currencies such as Bitcoin, at least then you’ll have some purchasing power.

  1. September 23, 2014 at 4:00 pm

    Pretty! This has been a really wonderful post. Many thanks for providing these details.

  1. September 3, 2014 at 11:00 am
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