Today, the Congressional Budget Office (CBO) revised upward its estimates for future U.S. federal debt levels. As the graph below shows, the CBO projects the federal debt held by the public to reach 100% of GDP in 2038.
How bad is this news? Just last year, the CBO predicted that this debt measure would actually fall to just 53% by 2030.
The reasons for this massive revision are summarized nicely by Peter Coy at Bloomberg Business Week. In short, they include:
- New budget agreements from January, which made the Bush tax cuts permanent for many Americans
- Longer life expectancy estimates, which mean higher costs for both Social Security and Medicare
- A growing number of worker disability claims
- Higher unemployment forecasts, which means lower GDP and higher Debt-to-GDP ratio
These factors work together to substantially worsen the long-term prospects of the U.S. national debt level.