Future U.S. debt held by the public is projected to soar to unsustainable levels if current policies remain unchanged
June 02, 2012
SOURCE: Peter G. Peterson Foundation projections based on data from the Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2013 to 2023, February 2013, and The Long-Term Budget Outlook, June 2012. Data from the Office of Management and Budget, The President's Budget for Fiscal Year 2014, April 2013.NOTE: Projections are based on CBO's definition of current policy, plus the automatic reductions (sequestration) in spending that began on March 1, 2013.
There are many ways to measure a country's fiscal health, but the best overall gauge is federal debt relative to the size of our economy (gross domestic product, or GDP). Excluding the various governmental trust funds, our public debt is more than $10 trillion, which is about 70 percent of GDP. That's already high relative to historical levels, but the real threat is right in front of us: If we do not change our current policies, official projections show that our debt is on an explosive trajectory. The Congressional Budget Office has projected that federal debt would soar to over 200 percent of GDP in less than 30 years. Studies show that economic growth slows if debt stays above 90 percent of GDP for very long. An economic crisis is likely to occur long before debt gets anywhere near 200 percent, which makes our current path unsustainable.
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