July 14, 2010
The Department of Treasury announced today that the annual federal deficit for FY 2010 rose above $1 trillion during the month of June. This is just the second fiscal year in history that the deficit reached this sobering height—last year was the first. President Obama and Congressional Democrats’ have embarked on an unprecedented spending spree that will lower economic growth, reduce investment, increase the cost of borrowing and kill American jobs. As CBO’s recently released Long-Term Budget Outlook confirms, Democrats’ are taking the nation down an unsustainable path that will lead to a lower standard of living for generations to come.
CBO’s Long Term Outlook by the Numbers
Debt Held by the Public:
- To pay for the Democrats’ spending spree, debt held by the public (as opposed to the overall national debt which includes inter-governmental holdings) will skyrocket, doubling from its current level of 62 percent of GDP to 125 percent of GDP by 2027, surpassing Greece’s current debt level.
- CBO estimates that our nation’s debt will grow by five times, to 308 percent of GDP by 2047 and will increase tenfold by 2068, when it will reach 614 percent of GDP or $316.8 trillion.
- If nothing is done to address our spending and borrowing crisis, CBO predicts the U.S. will rack up public debt totaling 947 percent of GDP by 2084.
Total Government Spending:
- Government spending as percentage of GDP will increase by more than half, from 24 percent of GDP in 2010 to 36.5 percent of GDP by 2037.
- Total federal spending will reach 50 percent of GDP by 2054.
- By 2084, the government is projected to spend 80 percent of the nation’s entire GDP.
- Spending on the three major entitlement programs will increase from 10.5 percent of GDP or roughly $1.5 trillion in 2010 to 18 percent of GDP or $5.2 trillion by 2040.
- Federal spending on health care alone will increase from 5.5 percent of GDP or $803 billion in 2010 to 12 percent of GDP or $3.4 trillion by 2040.
- By 2084, entitlements will consume 26.4 percent of U.S. GDP or $18.7 trillion. Health care spending alone will take up 20.1 percent of GDP—higher than the post-World War II average for all federal spending.
- Interest payments on debt borrowed by the government will increase rapidly, doubling from 1.4 percent of GDP in 2010 to more than 3 percent of GDP to $570 billion by 2017.
- By 2046, interest payments to foreign countries like China will have increased by ten times from today’s levels to 14.1 percent of GDP.
- At the end of CBO’s long-term fiscal window, interest spending to finance our public debt will account for 46 percent of GDP by itself. Interest on borrowed money will, by far and away, be the single largest expenditure made by our federal government and will drive us uncontrollably further into debt without yielding any benefit whatsoever.
Note: All data is taken from CBO’s long-term alternative fiscal scenario, as opposed to the extended-baseline scenario. The alternative scenario assumes that oft-extended provisions of current law will be maintained, including Doc Fix increases, stopping cuts to Medicare, discretionary spending increases, etc.
Economic Disaster and Joblessness
CBO’s long-term fiscal outlook clearly shows that the cost of perpetuating unimaginable spending, record deficits, and astounding debt will mean fewer jobs, less opportunities, and a failed economy.
- The growing deficits under the Democrats’ policies will ultimately lead to a lower standard of living and less opportunity for future generations. According to CBO, “budget deficits would reduce national saving, leading to higher interest rates, more borrowing from abroad, and less domestic investment—which in turn would lower income growth in the United States.”
- As our spending grows to unsustainable levels, the U.S. will sacrifice sovereignty and become dependent on debt borrowed from foreign countries.
- Our debt will destroy confidence in our markets and send the U.S. into a perpetual economic spiral. According to CBO, “higher debt would increase the probability of a fiscal crisis in which investors would lose confidence in the government’s ability to manage its budget.”
- The federal government must control spending, end the deficits and begin to change the debt trend line immediately to avoid disaster. As CBO states, “the sooner that long term changes to spending and revenues are agreed on, and the sooner they are carried out once the economic weakness ends, the smaller will be the damage to the economy from growing federal debt.”
For additional information, contact:
The House Republican Conference Policy Office