In order to return the country’s debt to the level it was before the coronavirus pandemic, the Congressional Budget Office estimates spending cuts and revenue bumps need to total $900 billion a year for 25 years.
The Hill reports that the Long Term Budget Outlook predictions were released Monday.
The forecast found that even if the country waits until 2025 to take any fiscal action, it would take sweeping changes in both spending and taxing to stabilize the debt at its pre-crisis level of 79%.
According to the report, the 3.6% of GDP the government would have to chop off the annual deficit will grow if Congress waits to act. By 2030 it rises to 4.4% and by 2035 it increases to 5.9%.
CBO Director Phillip Swagel called the long-term fiscal challenge “daunting.”
“At the same time, the United States is not facing an immediate fiscal crisis,” he noted, saying the debt puts the country in an increasingly risky position over time.
“There is no set tipping point at which a fiscal crisis becomes likely or imminent, nor is there an identifiable point at which interest costs as a percentage of GDP become unsustainable. But as the debt grows, the risks become greater,” Swagel said.
According to CBO’s latest report, the debt rises from 79% of GDP last year to 98% of GDP in 2021. The prediction indicates it is on track to surpass the historical debt record of 106% in 2023.
With the level of debt increasing, so will the amount of interest the government will owe annually. The CBO notes that interest is set to grow faster than any other spending category.
By the 2040s, the cost of servicing the debt will be higher than Social Security spending as well as the annual spending Congress approves for both defense and domestic priorities combined, the report notes. Only mandatory health spending through programs such as Medicare and Medicaid will be higher than the interest.
By 2050, the debt will reach 195% of GDP, which is nearly twice the size of the economy. Before the Great Recession began over a decade ago, the debt burden stood at 35% of GDP.
Economists predict the economic coronavirus response will add 45 percentage points to the debt over a 30-year period.
The country’s deficit had already been on the rise prior to the pandemic, according to the report. In 2016, the deficit was $587 billion. Last year, it hit nearly $1 trillion.
The virus relief packages are slated to raise the deficit to $3.3 trillion, according to the report.