Appearing before the House Budget Committee, Congressional Budget Office director Douglas Elmendorf testified Tuesday morning that the nation’s debt will exceed 100 percent of GDP within 25 years, and continue a precipitous rise from there. Elmendorf called the rise a “trend that could not be sustained” and one that will eventually bring “the risk of a fiscal crisis.”
The CBO head added that by the end of 2015, federal debt “held by the public” will be 74 percent of GDP, “more than twice what it was at the end of 2007, and higher than any year since 1950.”
“Although the deficits in our baseline projections remain roughly stable as a percentage of GDP through 2018, as I noted, they rise after that,” Elmendorf said. “The deficit in 2025 is projected to be $1.1 trillion, or 4% of GDP, and cumulative deficits over the 2016 to 2025 period are projected to total $7.6 trillion.”
“We expect that federal debt held by the public will amount to 74% of GDP at the end of this fiscal year, more than twice what it was at the end of 2007, and higher than in any year since 1950,” the CBO director said. “By 2025, in our baseline projections, federal debt rises to nearly 79% of GDP.”
“When CBO last issued long-term budget projections in the summer, we projected that, under current law, debt would exceed 100 percent of GDP 25 years from now, and would continue on an upward trajectory thereafter. That trend that could not be sustained,” Elmendorf continued.
“Such large and growing federal debt would have serious negative consequences, including increasing federal spending for interest payments, restraining economic growth in the long term, giving policymakers less flexibility to respond to unexpected challenges, and eventually heightening the risk of a fiscal crisis,” he concluded.