The CBO projects trillion dollar deficits by 2020 and 2 trillion by 2028.
Long History of Growing Debt
The Bipartisan Policy Center reports Trillion Dollar Deficits Coming Soon. Here’s Why It Matters.
When CBO published its mid-2017 update, the projections were far from rosy. The combination of the baby boomers phasing into retirement and ever rising health care costs have produced a systemic imbalance between the federal government’s spending and revenues. The Great Recession, military conflicts overseas, prior tax cuts, and other policy changes have also contributed to the steadily rising national debt.
Even before recent policy actions, CBO estimated last June that deficits would exceed $1 trillion by Fiscal Year (FY) 2022. Now, that infamous milestone is expected to be crossed in FY2020 (and could happen as early as next year, for which CBO’s deficit projection clocks in at $981 billion).
Since the Budget Control Act of 2011, CBO’s baseline debt projections have been trending up, but the latest estimates are notably worse. At 96 percent of gross domestic product (GDP), debt held by the public is projected to be nearly the size of the whole economy in 2028, which astoundingly is close to 40 percentage points higher than CBO’s 2012 projection for the same year.
The most troubling news is that this is the conservative picture of where the United States is headed. CBO attributes the increase in this year’s debt projections to a few main factors: The Tax Cut and Jobs Act, the Bipartisan Budget Act of 2018, and increasing interest payments on the federal debt. Should the tax cuts and spending increases be extended, CBO’s alternative (and more realistic) fiscal scenario shows that debt would exceed the size of the economy in 2028 (105 percent of GDP), with deficits crossing the $2 trillion watermark in the same year. If this scenario plays out, interest payments at that point would consume 32 percent of all income tax revenue, meaning nearly one in every three dollars Americans pay in income taxes would be used solely to service outstanding debt.