The U.S. risks a fiscal crisis if it doesn’t get large and continuously growing federal debt under control, the Congressional Budget Office said Tuesday.
In its new long-term budget outlook, the nonpartisan CBO said federal debt held by the public is now 74% of the economy and will rise to 106% of gross domestic product by 2039 if current laws remain unchanged. Read the 2014 long-term budget outlook.
In its last long-term budget outlook in September 2013, CBO said debt held by the public was 73% of GDP and projected debt would be 102% of GDP in 2039.
The stark warning from the CBO comes as deficits have recently been falling. For the current fiscal year, for example, the CBO is projecting a deficit of $492 billion, which would be 2.8% of gross domestic product.
The deficit in fiscal 2013 was $680 billion, the first shortfall below $1 trillion of Barack Obama’s presidency. The deficit hit a record of $1.4 trillion in 2009.
But the agency expects deficits to rise in coming years as costs related to Social Security, Medicare and interest payments swell.