US budget office highlights tipping point for US debt
The US CBO released a report outlining long-term US debt scenarios.
The first projection assumes that the US hits the ‘fiscal cliff’, automatic budget cuts take place and the Bush tax cuts expire (they note that this would hurt growth). The second assumes that tax cuts are extended and social programs/obligations continue to grow at the current pace.
Policymakers will need to increase revenues substantially above historical levels as a percentage of GDP, decrease spending significantly from projected levels, or adopt some combination of those two approaches.
The timeline gives the US until about 2022 to really tackle the big questions. After that, interest payments begin to spiral.