CBO says federal debt is heading to the highest levels since World War II

Public debt is expected to reach historically high levels and its current growth rate will be roughly equal to that of the US economy by 2028, the Congressional Budget Office announced Tuesday.

By the end of the year, the ratio of federal debt to US gross domestic product will reach 78%, according to the CBO, the highest ratio since 1950.

Debt is expected to reach 96% of GDP by 2028 before surpassing the record high of 106% reached in 1946.

Currently, the federal government's debt burden is about $ 15 trillion, according to Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget, a non-partisan think tank.

The highest of 1946 was caused by a surge in spending to finance World War II, and other peaks in debt were driven by economic downturns. But the current bulge comes in the midst of a relatively healthy economy, suggesting a structural gap between what the country collects in taxes and how much it spends.

The measure of "debt to GDP" compares the overall amount of debt held by the federal government with the size of the entire US economy. Economists use the comparison, which takes into account inflation and overall economic growth, to illustrate the magnitude of the deficit.

The long-term deficit analysis that the CBO released Tuesday goes beyond its typical estimates of the fiscal outlook over the next decade. The analysis clearly shows that deficit projections are impossible to accurately assess, in part because they can not account for unforeseen changes in federal policy, economic trends or global events.

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The CBO expects the Republican tax law passed last fall to add $ 1.84 trillion to the federal deficit over the next 10 years. Republican leaders have argued that the cuts will revive the economy, creating enough economic growth to offset much of the debt additions. But CBO and other non-partisan analysts have repeatedly rejected this claim.

Beyond 10 years, CBO said its estimates were much less accurate but that it did not see tax law creating large-scale and long-term additions to the national debt. "Beyond 2028, the effects of [tax law’s] the main permanent provisions should be modest, even if their precise size is very uncertain, "said the CBO.

In its analysis, the CBO assumes that personal income tax law reductions will expire before the end of this decade. In writing the bill, Republicans have put these rates out as part of an effort to get their measure to comply with the rules of procedure that they used to get through the Senate.

But GOP leaders have repeatedly said that tax cuts will not be expired, promising that a future Congress will act to expand them. If individual tax cuts are extended, the projected additions of the law to the deficit will likely increase considerably.

The Committee for a Responsible Federal Budget said Tuesday that US debt would reach about 200% of GDP in 2048 if the tax cuts and congressional spending planned for last March became permanent.

In 2017, the CBO was forecasting that the federal debt ratio would reach 150% by 2047. But this year, despite the adoption of the tax law, the CBO estimates that the federal debt will reach 148% of the federal debt. 39, here 2047. A slight decrease is partly due to the fact that the CBO has revised downward its estimates for the cost of social security and health care programs such as Medicaid and Medicare. The CBO has also lowered its estimates for how much it expects the child health insurance program and the Affordable Care Act to cost.

The permanent feature of GOP tax law reduces corporate tax rates from 35% to 21%. But this change does not seem to fundamentally alter the US long-term deficit, as business revenues account for less than 1.5 percent of GDP. Personal income taxes account for about eight per cent of GDP.

The CBO still expects a very fast debt increase, with particularly fast growth in the amount that America spends to pay its debt interest. Interest costs are expected to double as a share of the economy over the next decade and even exceed the cost of social security funding – the largest expenditure in the federal budget – from the federal budget. here 2048.