Congressional Budget Office Offers Dire Warning About Annual Deficits Dwarfing GDP

The Congressional Budget Office says that the amount of federal debt held by the public is going to rise much higher than the Gross Domestic Product by 2035.

The nonpartisan CBO released its estimates during a briefing on Friday afternoon.

CBO Director Phillip Swagel said debt levels will rise as increases in spending on Social Security, Medicare and interest payments outpace growth in revenues.

In the coming years, net interest costs are projected to be similar to the amounts of discretionary spending for either defense or nondefense activities.

Swagel says the annual budget deficit will grow to $2.7 trillion a year in the next ten years.

He says the Federal debt held by the public will rise from 98 percent of GDP in 2024 to 118 percent in 2035, surpassing its previous high of 106 percent of GDP in 1946.

Measured in relation to economic output, the deficit over the next 10 years will be about 50 percent larger than its historical average over the past 50 years.

The deficits are especially large given the unemployment rate forecasts. Swagel notes that historically, rates below 4.5 percent have generally occurred in years with much smaller deficits.

CBO says it expects economic growth to slow from an estimated 2.3 percent in 2024 to 1.9 percent in 2025 and 1.8 percent in 2026 amid higher unemployment and lower inflation.

Real GDP is then expected to grow by 1.8 percent per year, on average, through 2035.

The numbers could get worse. All of the projections released on Friday reflect the effects of the tax changes scheduled to take place at the end of the year under current law.

President-elect Trump and Congressional Republicans are working to extend and possibly increase those cuts.