CBO: Debt Could Rise To Twice GDP

Politico reports:

Applying a little shock treatment to White House deficit talks, the Congressional Budget Office released new projections Wednesday showing that the U.S. debt could be nearly twice the nation’s GDP in 25 years absent real changes in spending and tax policy.

Instead of confining itself to CBO’s often rigid long-term baseline rules, the report creates an “alternative fiscal scenario” which the authors argue is more politically realistic in that it doesn’t assume that Congress will let all the Bush-era tax cuts expire or that Medicare physician payments will be allowed to drop precipitously over the coming years.

Upper middle-income families would still be protected from the Alternative Minimum Tax under the same scenario, and revenues held to 18.4% of GDP, close to what’s become a Republican goal.

Under these assumptions, as mapped out by CBO, debt held by the public would exceed 100% of GDP by 2021 and exceed its historical peak of 109% two years later. By 2035, it would be approaching 190% of GDP and equally important interest on that debt would be equal to 9% of GDP –more than five times current levels.