Washington has been drowning in red ink for years and it’s only going to get a lot worse over the next decade, a fresh government estimate shows.
The U.S. is likely to add $12 trillion in public debt from 2020 to 2029 through a combination of higher government spending and slower economic growth, according to the Congressional Budget Office. [Ie according to US government.] That’s on top of the $16.6 trillion the government is expected to owe to the public at the end of 2019.
Unless the red fiscal tide is reversed, the percentage of the U.S. public debt relative to the size of the economy would climb to 93% by 2029 from 78% right now.
That’s a bit lower than the CBO’s prior forecast, but it would still be historic in a time of peace. The last time the U.S. debt was that big was shortly after the end of World War Two, a period when the government spent enormous sums to defeat the Nazi menace and Japanese militarism.
Expressed another way, the public debt would average 4.4% of gross domestic product from 2020 to 2029.
“Such deficits would be significantly larger than the 2.9% of GDP that deficits averaged over the past 50 years,” the CBO said.
What’s the problem? The CBO predicts a steady increase in federal spending based on current law, particularly to pay for health care and other expenses for the elderly.
Although tax receipts are likely to increase despite large tax cuts by the Trump White House, they won’t rise as fast as spending, the agency said.
At the same time, the U.S. economy is likely to decelerate from a projected 3.1% growth rate in 2018 to an annual average of 1.7% over the next decade [How much of that 1.7% will be statistical hocus pocus?], the CBO projects. Previously the agency had predicted the economy would grow slightly faster in the next 10 years.
The agency believes slow population growth is one of the chief reasons — along with higher interest rates by the Federal Reserve.
The CBO, of course, could be wrong. The economy could grow much faster than it expects, taxes could rise or spending could fall. [Or taxes could fall when the bubblegedon hits.] Yet if the agency is right, the fiscal health of the U.S. will continue to deteriorate.
In 2019, the annual U.S. deficit is forecast to rise to $900 billion from $779 billion in 2018. The deficit is projected to top $1 trillion annually beginning in 2022 — two years later than the CBO originally forecast. [Actually the FY2019 deficit just came in at $984 billion in September.]
Source: Market Watch