CBO report: The nation’s spending remains a problem that won’t be resolved any time soon
Last week, the Congressional Budget Office raised its federal deficit projection by $134 billion, to $693 billion for fiscal year 2017, and further projected that over the next ten years, the federal government will add another $10 trillion to the national debt.
With the total gross debt set to surpass $20 trillion in the coming months, federal debt held by the public will equate to around 78 percent of GDP by the year’s end. These figures present some serious problems for the future economic condition of the United States. Several empirical studies consistently demonstrate that developed economies that reach debt levels of 90 percent of GDP and above fail to achieve robust levels of economic growth.
In a 2010 working paper, Harvard economists Carmen Reinhart and Kenneth Rogoff found that, “For 1900–2009, median and average GDP growth hovers around 4–4.5 percent for levels of debt below 90 percent of GDP, but median growth falls markedly to 2.9 percent for high debt (above 90 percent); the decline is even greater for the average growth rate, which falls to 1 percent.”
When looking at current debt and growth figures for the 35 OECD countries in 2016, a similar pattern is found. The trend line shows that there is a clear relationship between higher levels of debt and lower growth rates, particularly for levels of debt above 90-100 percent of GDP. In this study, no country with publicly-held debt above 100 percent experienced growth of more than 1.4 percent.
Yet another increase to our national debt will have a terrible impact on future generations and could lead to another financial crisis in the not-so-distant future. Click here to help Tea Party Patriots encourage lawmakers to take our nation’s spending problem seriously and implement policies to cut out unnecessary spending.