The U.S. has the largest economy in the world, but the country has to deal with numerous challenges as well. It is worth noting that federal debt is one of the most serious issues. Moreover, this problem will continue to affect the country for decades. According to the Congressional Budget Office (CBO), the federal debt will soar to levels unseen in the country’s history over the next 30 years.
The Congressional Budget Office released its long-term budget forecast. According to this report, the CBO expects that the debt will rise to 98% of gross domestic product (GDP) by the end of 2020. People should take into account that, the federal debt will reach 195% of GDP in 2050. Interestingly, such levels would demolish the previous record of 106% just after World War Two.
The national debt was growing even before the coronavirus pandemic. However, the pandemic created additional problems for the world’s largest economy. Importantly, debt made up 79% of GDP before the pandemic in 2019. Also, before the previous recession, the federal debt was 35%.
Importantly, the coronavirus pandemic is far from being over. At the moment, the U.S. has the highest number of cases in the world and this fact once more underlines the severity of this problem. Moreover, the number of coronavirus cases increased in Europe. This fact once more shows that, it won’t be easy to contain this virus in the upcoming months.
People in the U.S. and elsewhere must follow regulations. They should keep in mind that many companies are struggling to survive and another lockdown may inflict irreparable damage to some of them. Companies as well as authorities should find a way to prevent this outcome.
Congressional Budget Office and economy
The U.S. economy suffered losses due to the coronavirus pandemic. According to the director of the Congresional Budget Office, Philip Swagel, a fiscal crisis is not immediately at hand as long as Federal Reserve will keep interest rates so low.
The good news is that the debt is still manageable and Congress has time to tackle this issue. However, action may be soon needed to handle major Social Security, Medicare, and highway trust funds set to dry up within the next 11 years.
Interestingly, this report comes as the federal deficit balloneed to $3.3 trillion in 2020. The main contributing factor was the massvie response mounted by the government to deal with pandemic. It is worth noting that, Congressional leaders are hoping to approve legislation that would avoid a government shutdown on September 30.
Importantly, at some point, lawmakers must grapple with the task of funding the government in fiscal 2021. Apart from this task, Congress has no budget caps to set overall funding levels. Also, they do not have to constrain federal discretionary spending in fiscal 2022.
Based on the information provided by CBO, the agency projected that mandatory spending will increase from nearly 13% of GDP in 2019. This number is projected to reach 17.5% in 2050. The White House should work with lawmakers from both parties to find the best solution to this issue. It is desirable to tackle this challenge as soon as possible.
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