Despite What Obama Says, the Federal Debt Is Not Improving
April 13, 2015
When the Great Recession hit, the federal debt was equal to about 40 percent of Gross Domestic Product (GDP). However, to fight the recession, Congress enacted an $800 billion dollar stimulus bill. Stimulus spending, combined with already enacted spending and tax policy, resulted in four years of trillion dollar deficits. As a result, the debt ballooned to 78 percent of GDP in 2013, almost twice the pre-recession level.
The annual deficit is now declining at a stately pace, but by 2016 it will begin increasing again, and by 2020 under Congressional Budget Office's (CBO) alternative fiscal scenario, we will once again return to annual deficits above a trillion dollars, thereby once again greatly increasing the national debt.
The accumulation of debt should prevent federal policymakers from feeling any sense of accomplishment. In fact, CBO estimates the debt will be well over 100 percent of GDP by 2039.
When CBO incorporates its estimates of the impact of the continuing large federal deficits on the nation's economy, it estimates the accumulated debt held by the public will reach an astounding 180 percent of GDP by 2039. One wonders if members of Congress or the President read these CBO reports.
Under the CBO estimates used by Congress, we have a huge debt hole. Under the more comprehensive fiscal gap measurement, we have a chasm. Nevertheless, Congress has no plans to deal with the notorious level of debt.
Source: Ron Haskins, "The Federal Debt is Worse Than You Think," Brookings, April 8, 2015.
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