Obama, Congress warned: National debt growing faster

From: The Oval

The Congressional Budget Office reported Wednesday that the nation probably will owe outside creditors more than the size of the entire economy in 10 years.

The forecast -- a public debt equal to 101% of the economy in 2021, and rising to 187% by 2035 unless dramatic changes are made -- should be a warning to President Obama, Congress and Vice President Biden's band of bipartisan negotiators meeting daily to devise just a short-term fix.

By comparison, last year's long-term budget outlook from CBO forecast a public debt equal to 87% of the economy by 2020. The difference -- 14% -- would be about $2 trillion based on today's economy, even more as it grows.

"The explosive path of federal debt ... underscores the need for large and rapid policy changes to put the nation on a sustainable fiscal course," the report says.

It goes on: "Large budget deficits and growing debt would reduce national saving, leading to higher interest rates, more borrowing from abroad and less domestic investment, which in turn would lower income growth in the United States."

The problem outlined in the report: spending that far outpaces revenue as the years pass. Here's a simplified version:

• Spending is projected to grow from 24% of the economy today to 26% in 2021 and 34% in 2035.
• Revenue is projected to grow from 15% today to 19% in 2021, where it would remain in 2035.
• Annual deficits would be 7.5% of the economy in 2021, less than today's 9.3%. But each year's deficit adds to the national debt. By 2035, the deficit would be 15.5% of the economy, and the accumulated debt would be 187%.

Sen. Kent Conrad, chairman of the Senate Budget Committee, said the report should prompt negotiators seeking ways to raise the nation's debt limit to think big.

"CBO's new long-term budget outlook again highlights the urgency of reaching agreement on a bipartisan and comprehensive long-term deficit and debt reduction plan," he said. "We must address the projected explosion in federal debt. If we fail to act, it will have devastating consequences for our economy and for the future well-being of the American people."

Rep. Paul Ryan, chairman of the House Budget Committee and author of a controversial plan to cut $4.4 trillion from annual deficits over 10 years, noted CBO warned of a credit crisis unless changes are made:

Today the CBO reiterated what the American people know, but too many in Washington simply refuse to acknowledge: We are headed for the most predictable economic crisis in American history, and Washington is not providing the leadership we need to avoid it. As Congress debates the president's request for an increase in the statutory debt ceiling, the CBO warns of a more ominous credit cliff -- a sudden drop-off in our ability to borrow imposed by credit markets in a state of panic.