America is sinking under Obama’s towering debt

July 2, 2010 06:46


The CBO warns of potentially devastating consequence for the United States if this debt mountain is not tackled, and even points out that its “projections understate the severity of the long-term budget problem”.

Nile Gardiner at Telegraph.co.uk

I hope the White House is paying attention to the latest annual Congressional Budget Office Long-Term Budget Outlook, which offers a truly frightening picture of the scale of America’s national debt, with huge implications for the country’s future prosperity. According to the non-partisan CBO, “the federal government has been recording the largest budget deficits, as a share of the economy, since the end of World War II”:

As a result of those deficits, the amount of federal debt held by the public has surged. At the end of 2008, that debt equaled 40 percent of the nation’s annual economic output (as measured by gross domestic product, or GDP), a little above the 40 year average of 36 percent. Since then, large budget deficits have caused debt held by the public to shoot upward; the Congressional Budget Office (CBO) projects that federal debt will reach 62 percent of GDP by the end of this year—the highest percentage since shortly after World War II.

In its report, the CBO also offers two alternative long-term scenarios. The first long-term budget scenario, the more conservative extended baseline scenario, is worrying enough:

Federal debt held by the public would grow from an estimated 62 percent of GDP this year to about 80 percent by 2035. Interest payments, which absorb federal resources that could otherwise be used to pay for government services, currently amount to more than 1 percent of GDP; under this scenario, they would rise to 4 percent of GDP (or one sixth of federal revenues) by 2035.

The second, far bleaker budget outlook, is the alternative fiscal scenario, whichincorporates several changes to current law that are widely expected to occur or that would modify some provisions of law that might be difficult to sustain for a long period.” Under this scenario:

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