By Robert Schroeder
WASHINGTON – Lower tax revenues and higher federal spending to fight the recession will boost the federal debt to 62 percent of the nation’s total overall economic output by the end of the year, the highest percentage since just after World War II, the Congressional Budget Office predicted Wednesday.
In a report released Wednesday morning about the long-term budget outlook, CBO also predicted that the debt would reach 87 percent of the U.S. gross domestic product by 2020 if tax cuts enacted during George W. Bush’s presidency are extended.
The agency further estimated that federal spending on mandatory health care programs like Medicare and Medicaid will grow to 10 percent of GDP in 2035 if current laws don’t change.
Writing on his blog, CBO Director Douglas Elmendorf said that growth in spending on health care programs is the “central fiscal challenge facing the nation,” and that that spending could cause the debt to grow to “unsustainable levels.”
“If policymakers are to put the nation on a sustainable budgetary path, they will need to let revenues increase substantially as a percentage of gross domestic product, decrease spending significantly from projected levels, or adopt some combination of those two approaches,” wrote Elmendorf.
Elmendorf was also scheduled to testify Wednesday before a presidential commission charged with finding bipartisan ways to slash the trillion-dollar U.S. budget deficit.
President Barack Obama is stressing the need for the U.S. to spend on some programs, including unemployment insurance, to help out those battered by the recession. Obama also pressed world leaders at last weekend’s G-20 summit to continue spending to assist the global economy.
Congressional Republicans have slammed spending by Obama and Democrats, saying programs like the economic stimulus package haven’t resulted in many jobs and have worsened the country’s finances.