CBO Report: Deficit to Skyrocket to Historic World War II Highs

Wednesday, 16 Jul 2014 07:55 AM

By Melanie Batley

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Image: CBO Report: Deficit to Skyrocket to Historic World War II Highs
The Congressional Budget Office has predicted that the federal deficit will skyrocket in coming years to levels unseen since World War II, even though the White House reported last week that the deficit this year was at its lowest of the Obama presidency.

"Deficits are projected to rise steadily and, by 2039, to push federal debt held by the public up to a percentage of GDP seen only once before in U.S. history," just after World War II, the nonpartisan agency said in a report issued Tuesday, according to Politico.

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The current level of debt is 74 percent of the economy, and if current trends continue, the debt to GDP ratio will climb to 106 percent by 2039, according to the CBO.

"How long the nation could sustain such growth in federal debt is impossible to predict with any confidence. At some point, investors would begin to doubt the government's willingness or ability to pay its debt obligations, which would require the government to pay much higher interest costs to borrow money. Such a fiscal crisis would present policymakers with extremely difficult choices and would probably have a substantial negative impact on the country," the report warned.

The agency said the projected debt growth can largely be attributed to increasing costs of Social Security and Medicare, the expansion of subsidies under Obamacare, and interest payments.

The Obama administration reported last week that it expects this year's deficit to shrink by roughly $100 billion to $583 billion, and will continue to decline for several more years before increasing again.

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