WASHINGTON — A new report says the national debt is on pace to equal the annual size of the economy within a decade, levels that could provoke a European-style debt crisis unless policymakers can slam the brakes on spiraling deficits.
The Congressional Budget Office study released Wednesday offers a fresh reminder of what's at stake in ongoing talks led by Vice President Joe Biden that are aimed at slashing more than $2 trillion from the federal deficit over the coming decade as the price for permitting the government to take on more debt to pay current obligations.
CBO says the rapidly growing debt burden increases the probability of a fiscal crisis in which investors lose faith in U.S. bonds and force policymakers to make drastic spending cuts or tax hikes.
"As Congress debates the president's request for an increase in the statutory debt ceiling, the CBO warns of a more ominous credit cliff — a sudden drop-off in our ability to borrow imposed by credit markets in a state of panic," said House Budget Committee Chairman Paul Ryan, R-Wis.
The CBO analysis underscores the magnitude of the nation's fiscal problems as negotiators struggle to lift the current $14.3 trillion debt limit and avoid a first-ever, market-rattling default on U.S. obligations. The Biden-led talks are at a critical stage, as Democrats and Republicans remain at loggerheads over revenues and domestic programs such as Medicare and Medicaid.
With the fiscal imbalance requiring the government to borrow more than 40 cents of every dollar it spends, CBO predicts that without a change, the national debt will soar from 69 percent of gross domestic product this year to 109 percent — the record set in World War II — by 2023.