That’s the year that the federal debt is projected to reach 100 percent of gross domestic product.
Federal debt held by the public is now about 73 percent of GDP, according to a Congressional Budget Office report yesterday. That’s already the highest share in history, except for a few years after World War II, according to the report.
Federal debt as a share of GDP was 32.5 percent as recently as 2001, following an economic boom in the 1990s. It was 36.3 percent in 2007, before a deep recession that brought the figure to 40.5 percent in 2008, 54 percent in 2009, 62.9 percent in 2010, 67.8 percent in 2011 and 72.6 percent in 2012.
While increased tax revenues and restraint in federal spending this fiscal year will shrink the budget deficit to its smallest size since 2008, deficits are projected to rise in the period between 2023 and 2038 in part because of increased spending on health-care programs and Social Security.
Rising debt has “significant negative consequences” for the economy including less “private investment in productive capital” and a greater risk of fiscal crisis, the CBO report said.
The report’s projections presume that future U.S. tax and spending policies will tack closely to current law. President Barack Obama and his Democratic allies have clashed with Republicans over tax and spending policy, including an increase in the debt ceiling.
A mix of more tax revenue and spending restraint would put the budget on a more sustainable course, though that would require lawmakers to make politically unpalatable choices. Republicans have resisted calls to raise taxes on wealthier taxpayers, while Democrats have rejected calls by Republicans to implement deeper cuts in spending.
“To put the federal budget on a sustainable path for the long term, lawmakers would have to make significant changes to tax and spending policies—letting revenues rise more than they would under current law, reducing spending for large benefit programs below the projected levels, or adopting some combination of those approaches,” the CBO report said.
Bloomberg’s James Rowley has more here about CBO’s findings.