The Trillions of Reasons Why America Is Headed for a Debt Crisis

Romina Boccia

Economics,

America’s annual deficit—the difference between what the government spends and collects in taxes each year—is projected to rise steeply over the coming decade and to continue growing from there.

A fiscal storm has been brewing over America for years, and things are only getting worse.

Publicly held debt—the debt the U.S. is borrowing from credit markets (as opposed to debt owed to federal trust funds like Social Security)—is at its highest level as a percentage of gross domestic product since World War II.

To address the problem, Congress and the president must work together to enact a responsible, pro-growth budget that puts spending and taxes on a sustainable path to balance.

Budget cuts in President Donald Trump’s proposal to Congress this week are a key step on that path.

Our Fiscal Condition

America’s annual deficit—the difference between what the government spends and collects in taxes each year—is projected to rise steeply over the coming decade and to continue growing from there.

The deficit is projected to surpass $1 trillion in nominal terms before the 10-year mark, and then to keep rising.

In terms of the size of the economy, deficits are projected to rise from 2.9 percent of gross domestic product this year to 9.8 percent 30 years from now.

Deficits reached this level at the height of the Great Recession, but current projections assume the deficit will rise to such levels even without another severe economic crisis.

Instead, a combination of demographic changes and health care costs, combined with projected growth in interest on the debt, is driving this fiscal explosion.

Absent a course correction, the Congressional Budget Office’s latest projections show the debt will rise from 77 percent of gross domestic product today to a staggering 150 percent of GDP by 2047—almost double the current level.