Federal spending on interest payments would increase considerably when interest rates rose to more typical levels. Such high and rising debt would have serious negative consequences.

As recently as the end of 2007, federal debt equaled just 35 percent of GDP. In CBO’s baseline projections, federal debt held by the public reaches 78 percent of GDP by 2024, up from 72 percent at the end of 2013 and twice the 39 percent average of the past four decades (see the figure below). From 2015 through 2024, both revenues and outlays are projected to be greater than their 40-year averages as a percentage of GDP (see the figure below). By comparison, the deficit averaged 3.1 percent of GDP over the past 40 years and 2.3 percent in the 40 years before fiscal year 2008, when the most recent recession began. As a share of GDP, deficits are projected to rise from 2.6 percent in 2015 to about 4 percent near the end of the 10-year period. CBO expects that cumulative deficits during that decade will equal $7.6 trillion if current laws remain unchanged. Between 20, annual budget shortfalls are projected to rise substantially-from a low of $469 billion in 2015 to about $1 trillion from 2022 through 2024-mainly because of the aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt. This will be the fifth consecutive year in which the deficit has declined as a share of GDP since peaking at 9.8 percent in 2009 (see the figure below).īut if current laws do not change, the period of shrinking deficits will soon come to an end. Relative to the size of the economy, that deficit-at 2.8 percent of gross domestic product (GDP)-will be nearly a third less than the $680 billion shortfall in fiscal year 2013, which was equal to 4.1 percent of GDP. CBO now estimates that if the current laws that govern federal taxes and spending do not change, the budget deficit in fiscal year 2014 will be $492 billion. As it usually does each spring, CBO has updated the baseline budget projections that it released earlier in the year.

Us budget deficit 2014