By 2038, the federal debt would match GDP and spending would increase to 26 percent of economic output, compared to an average of about 21 percent during the past four decades, according to the estimates.
The CBO projected that federal revenues as a percentage of GDP would rise during that time to about 20 percent, or 2 percent higher than the average for the last 40 years, in part due to the tax increases that Congress approved with the fiscal-cliff deal lawmakers struck on New Years Eve.
At the same time, spending would increase to an estimated 26 percent of GDP, compared to an average of about 20 percent over the past 40 years, the CBO said.
Lawmakers disagreed on Wednesday about what Congress should take away from the estimates, with Democrats calling for increased revenue to help balance the books while Republicans argued for spending cuts, particularly with entitlements such as Social Security and Medicare.
Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, said the report proves the need for federal tax reform. “Some of the revenue raised by closing wasteful tax loopholes can be used to reduce the deficit, and tax reform will spark economic growth and create more jobs here at home.”
Sen. Orrin Hatch (R-Utah), the committee’s ranking member, said the CBO report serves as a call to action on restructuring the nation’s entitlement programs as Congress negotiates over raising the debt ceiling.
“The time to get serious is now,” Hatch said. “America — our seniors, our children and grandchildren — can’t afford a White House that chooses to whistle past the graveyard of our country’s fiscal health and the tremendous weight that our debt is around the neck of a robust, long-term economic revival.”
Lawmakers have made little progress in their long-troubled budget talks. Failure to reach deals on spending, taxation and borrowing in the coming weeks could lead to a partial government shutdown and default on the national debt.
Treasury Secretary Jack Lew said in a speech on Tuesday that the Obama administration’s policies have shrunk the deficit faster than at any time since just after World War II.
Post Fact Checker columnist Glenn Kessler awarded two Pinocchios for that statement, noting that rapid reductions almost always follow high-spending periods such as World War II and the so-called Great Recession, the worst part of which hit just before President Obama entered the White House.
Kessler also pointed out that debt as a percentage of GDP is still expected to be higher at the end of this fiscal year than it was when Obama took office, and that deficits fell in part because Congress rejected the president’s proposed spending increases after Republicans took control of the House.