- The Washington Times - Thursday, March 4, 2021

The government has opened the spending spigot over the last year to deal with the coronavirus crisis — but the Congressional Budget Office says unless something changes, Uncle Sam’s freewheeling ways will last long after the pandemic is over.

In a long-term budget report Thursday, the analysts at the government’s official scorekeeper said that by the middle of this century, federal spending will top 30% of gross domestic product, a rate the U.S. has never sustained before.

But taxes won’t keep pace, and 41 cents of every $1 spent will be borrowed in 2050, the CBO said. Debt also will reach deep into unprecedented territory, reaching more than twice the size of GDP, unless something changes.

Interest payments alone will total $61 trillion over the next 30 years and by 2051 will eat up nearly half of federal revenue. As borrowing intensifies, government debt held by the public will be more than twice the size of the economy as measured by GDP.

And persistent high debt brings “significant risks” to the country, CBO said.

“It would increase the risk of a fiscal crisis — that is, a situation in which investors lose confidence in the U.S. government’s ability to service and repay its debt, causing interest rates to increase abruptly, inflation to spiral upward, or other disruptions,” the agency said.

Even if that spiral doesn’t materialize, “less abrupt, but still significant” economic shocks are possible, such as another currency replacing the dollar as an international reserve currency, which would leave the government and private investors struggling to finance their activities.

The numbers, part of CBO’s annual long-term budget outlook, weren’t unexpected, but that didn’t make them any less stunning, coming as Congress ponders another massive spending bill to deal with the pandemic.

Grim reminders of the challenges permeated the 58-page report.

Interest costs on the debt, which currently account for 1.4% of GDP, will be 8.6% of GDP by the middle of the century. That means about $1 of every $12 in the U.S. economy will go to government payments on the debt.

Debt will total 202% of GDP in 2051, which is by far the largest rate the government has run. With GDP projected to be $66 trillion that year, that means the government’s total tab would be $133 trillion.

Currently GDP is $22 trillion, and debt is projected to be about that level this year. That means the government will add more than $100 trillion in new debt over the next 30 years.

“Today’s report provides a troubling snapshot of America’s fiscal outlook, which we know will only get worse from here,” said Michael A. Peterson, CEO of the Peter G. Peterson Foundation, which keeps a close eye on the federal fiscal picture. “Leaders must prioritize our public health and economic recovery, but they also need to be ready to act on fiscal solutions once the crisis has passed.”

Some of the pandemic effects are built in.

CBO projects a lasting birth dearth, with 130,000 fewer births each year this decade, and 160,000 fewer births each year in the following two decades. That means hundreds of thousands fewer people in the labor force to support an aging population.

Annual deaths will exceed annual births in 2044, CBO projected, saying the country at that point will rely exclusively on immigration for population growth. And the country will come to rely more on immigrants.

The U.S. currently is home to 195 million people of working age, 20 to 64, and 140 million people who are dubbed the dependent population because they are older or younger than that.

By 2050 the working-age group will have grown by 10 million people, but the dependent population will have grown by nearly 30 million.

• Stephen Dinan can be reached at sdinan@washingtontimes.com.

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