The Congressional Budget Office reported Tuesday that Congress would need to cut hundreds of billions of dollars each year from federal spending — or raise the same amount of new money in taxes — just to ensure that the national debt doesn’t get any bigger than it already is.
A blog post from two CBO analysts said the national debt is now 74 percent of the country’s gross domestic product. Economists have taken to the idea of comparing the debt to GDP as a way of gauging the ability of the U.S. to pay it back, but using raw numbers, the debt is $17.6 trillion.
According to CBO, Congress would have to make what many members would consider to be drastic cuts each year, or raise tons of new cash, just to keep the debt at 74 percent of GDP by 2039.
“[A] combination of cuts in noninterest spending… and increases in revenues that equaled 1.2 percent of GDP in each year beginning in 2015 — about $225 billion in that year — would hold debt 25 years from now, in 2039, to the same percentage of GDP that it is now,” CBO said.
That’s roughly equivalent to a 6.5 percent increase in new taxes each year, or a 6 percent cut each year just to stay even.
If Congress set a goal of returning to the historical average of debt to GDP, 39 percent, it would have to take more drastic steps.
“Meeting that goal by 2039 would require much larger changes in tax and spending policies — a combination of increases in revenues and cuts in noninterest spending, relative to current law, totaling 2.6 percent of GDP in each year beginning in 2015,” CBO said.
That’s the same as a $465 billion spending cut, or new revenues in that amount, or some combination of the two — each year, every year until 2039.
CBO’s numbers reveal the stark reality of a national debt that has become so large that it would now take several decades of strenuous effort just to hold it steady, and would require even more serious actions to start scaling it back.
For the last few years, Congress has been incapable of reaching any agreement to reduce the debt — and in fact, many members have stressed the need for deficit reduction over the last few years as deficits fell from more than $1.2 trillion a year to the roughly $550 billion it will be by the end of fiscal year 2014.
The split government has also made it impossible to find a long-term answer to the government’s spending problem. Republicans have said they won’t entertain any new tax increases, and that spending needs to be reduced instead.
But Democrats have refused most spending cuts, which has left Congress with no where to go except making small reductions to the discretionary spending accounts it controls directly.