Once COVID is Slain, Sustainable Budgets Must Be Priority
WASHINGTON – A Congressional Budget Office report estimating that persistent budget deficits will cause the federal debt to double in size over the next 30 years, “provides a troubling snapshot of America’s fiscal outlook, which we know will only get worse from here,” according to the head of the Peter G. Peterson Foundation, a fiscal watchdog.
In a report released Thursday, the CBO said that since the 2008 financial crisis and the pandemic, the government has depended heavily on borrowing and low interest rates to help an ailing economy.
But as the economy is expected to heal, the CBO has forecasted that interest rates will rise and spending on programs such as Social Security and Medicare will increase.
The estimates do not include President Joe Biden’s proposed $1.9 trillion coronavirus relief package, which would further add to the deficit in hopes of speeding faster growth and hiring.
Excluding Biden’s aid plan, the annual budget deficit would be equal to 10.3% of this year’s gross domestic product, a measure of the total size of the U.S. economy. The annual deficit as a percentage of GDP would decline over the next decade and then rise in the following decades to reach 13.3% in 2051.
All of that translates into the U.S. government carrying a higher debt load. The CBO said that publicly held debt would equal 102% of this year’s GDP. It estimated that the accumulated debt would grow to 202% of GDP by 2051.
Responding to all this, Michael A. Peterson, CEO of the Peter G. Peterson Foundation, said that prior to the pandemic, “we were already facing growing, trillion-dollar structural deficits, and this crisis has added trillions more, with additional amounts yet to come that are not even accounted for in CBO’s projections.
“Leaders must prioritize our public health and economic recovery, but they also need to be ready to act on fiscal solutions once the crisis has passed,” he said.
He then went on to note that the national debt crossed $28 trillion for the first time this week, “a staggering amount” and a milestone “that represents an enormous burden on our kids and grandkids.
“Worse yet, there is nothing but rapid growth in the years to come,” he said. “Interest on the debt will grow faster than any other budget category and reach unprecedented levels as a percentage of federal revenues and GDP. CBO projects that the government will spend more than $61 trillion in interest alone over the next three decades. These payments obviously do nothing to help address the many important challenges we face, such as climate change, infrastructure, economic justice, and national security.
“Once we tackle this terrible pandemic, lawmakers should work together to take control of our budget. Policy solutions are well known and available — they just require leadership. A fiscally sustainable foundation is vital to creating a stronger economy, enabling smart investments in our future and increasing opportunity and preparedness for the next generation,” Peterson said.
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