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CBO Warns of Unprecedented Debt Levels, Stagnant Economy, Joblessness

by Rachel MillsMarch 2, 2023
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The Congressional Budget Office (CBO) has released a report warning that the US is on track to add a staggering $19 trillion to its national debt over the next decade, surpassing previous economic forecasts. The CBO's projections indicate that changes in fiscal policy must be made to address the rising costs of interest and mitigate other adverse consequences of high and rising debt. The report estimates a $1.4 trillion budget gap in 2023 between government spending and tax revenues, and predicts that within a decade, the national debt in relation to the size of the economy will rise to unprecedented levels. Debt held by the public is projected to reach 118% of GDP by 2033 – the highest level ever recorded.

The CBO's new projections show $3 trillion more will be added to the national debt by 2033 than was previously expected. Over the next decade, the CBO predicts that deficits will average $2 trillion annually, with tax revenues continuing to lag behind the rising costs of entitlement programs, such as Social Security and Medicare. Additionally, the CBO predicts that the US economy will barely grow in 2023 after taking account of inflation, and joblessness will increase with the unemployment rate rising above 5% for the first time since 2021.

The CBO ascribes the expected growth slowdown to the Federal Reserve’s efforts to rein in inflation by raising interest rates. The new forecast could heat up the debate between Republicans on Capitol Hill and President Biden over taxes, spending, and raising the country's debt ceiling. Several GOP lawmakers, including House Speaker Kevin McCarthy (R-Calif.), have indicated that they will not vote to raise the debt ceiling - which limits the amount of money the government can borrow to fulfill its obligations - unless the president agrees to spending cuts.

"The warning is that the fiscal trajectory is unsustainable," said CBO Director Phillip Swagel. "It will be virtually impossible to change the country's fiscal trajectory, and balance the budget in 10 years, without changes to Social Security and Medicare. It's mathematically possible, but it's very, very challenging."

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