Fix the National DebtThe national debt continues to rise while our leaders struggle to pass a federal budget. Can you do better? Here’s your chance to find out.
The national debt is higher than it has been since just after World War II. And it is rising towards unprecedented – and unsustainable – levels. Learn more about our current path.
The Current National Debt PathThe national debt held by the public (which excludes what the government owes itself) is currently 77% of the economy (measured by Gross Domestic Product–GDP). That is nearly twice the average of the last 50 years of 40% of GDP. And it will continue to grow indefinitely without action. The nonpartisan Congressional Budget Office (CBO) projects that debt will exceed the size of the economy by 2033 and surpass the all-time record of 106% of GDP by 2035. By 2047, debt will be 150% of GDP and still climbing.
The Debt will be fueled by endless annual federal budget deficits (the difference between spending and revenue). The deficit is forecast to top the $1 trillion level by 2023 and remain on an upward path. Bringing spending and revenue more in line, either by reducing spending and/or increasing revenue, will be necessary to improve the fiscal outlook.
High and rising debt will threaten economic growth and the standard of living for all Americans as investment dwindles and the country becomes less competitive. **See why rising debt is a major problem.
Changing course will require halting the rise of the debt as a share of the economy in the medium term and reducing the debt toward historical levels in the longer term. See more on the targets.
Why 70% of GDP in 10 Years and why 40% by 2050?The fact is that there is no magic number for the national debt. It is not necessary to pay off the national debt entirely to restore our nation’s fiscal health. In fact, incurring some national debt can be useful in responding quickly to unexpected events such as wars and recessions. However, current debt levels limit this flexibility.
Measuring a nation’s debt as a share of its economy is a common method used by economists to gauge a country’s ability to handle its debt.
We need to establish an ambitious yet attainable fiscal goal and commit as a nation to achieving it. In the near term, we should look to halt the rise in debt as a share of the economy. The debt held by the public is currently 77% of the economy and CBO projects it will rise to 89% by 2027. Bringing the debt down to 70% in that period would mark significant progress in stopping the unsustainable growth of the debt.
Over the longer term, we should aim to bring down our high level of debt closer toward the historical level of around 40% of GDP. Debt at the level will provide ample room to deal with unforeseen developments and crises. For example, debt was below the 40% level just before the Great Recession. It would be much more difficult to confront a similar circumstance with our current level of debt.
This tool illustrates the tough budget trade-offs involved in order to promote an informed conversation on how we can set a sustainable fiscal course.
Can you fix the debt and build a responsible federal budget? Give it a try!