However, when the country finally emerges from its current health and economic crises, Americans will be left with a hangover.
On Thursday, the Congressional Budget Office estimated that for fiscal year 2020, which ended September 30, the US deficit reached $3.13 trillion – or 15.2% of GDP – thanks to the chasm between what the country spent ($6.55 trillion) and received ($3.42 trillion) for the year.
As a share of the economy, the estimated deficit for 2020 is more than triple the annual deficit for 2019. And it’s the highest since just after World War II.
The Treasury Department won’t release final numbers for fiscal year 2020 until later this month. But if the CBO’s estimates are correct, the country’s total debt to investors – which is essentially the sum of annual deficits accumulated over the years – will have exceeded the size of the economy, reaching nearly 102% of GDP, according to the calculations of the Committee for a Responsible Federal Budget.
The debt hasn’t been this high since 1946, when the federal debt stood at 106.1% of GDP.
“Debt is the size of the economy today, and soon it will be bigger than at any time in history,” said CRFB President Maya MacGuineas.
The problem with such high debt levels in the future is that they will increasingly limit what the government can do to meet the country’s needs.
Expenses are expected to continue to rise and far exceed revenues. And debt interest payments alone – even if rates stay low – will eat up an ever-increasing share of taxpayers’ money.
Given the risks of future disruptions, such as a pandemic, debt that is already outpacing economic growth puts the country at heightened risk of a fiscal crisis, which in turn would require deep cuts in services and benefits that Americans depend on.
“There is no defined tipping point at which a fiscal crisis becomes likely or imminent, nor any identifiable point at which interest costs as a percentage of GDP become unsustainable,” CBO Director Phillip said last month. Swagel. “But as the debt increases, the risks become greater.”