Federal Debt Could Reach 100% of America’s GDP by 2025, Says Congressional Budget Office
Nevertheless, the president told the crowd in Racine, Wisc. – a town with the second highest unemployment in the state – that the economy is turning the corner.
“We had to take some tough steps to pull the country out of the freefall we faced when I took office,” Obama said. “Back then, the economy was shrinking faster than it had in decades. Today, it’s growing again. Back then, we were losing an average of 750,000 jobs a month. Today, we’ve added private sector jobs for five months in a row.”
Still, unemployment has risen since Obama took office in January 2009 – it is now at 9.7 percent.
But the report by the CBO, the accounting arm of Congress, said deficit spending and long-term debt will hinder economic growth.
“Large budget deficits would reduce national saving, leading to higher interest rates, more borrowing from abroad, and less domestic investment -- which in turn would lower income growth in the United States,” the report said.
“Growing debt would also reduce lawmakers’ ability to respond to economic downturns and other challenges,” the report said. “Over time, higher debt would increase the probability of a fiscal crisis in which investors would lose confidence in the government’s ability to manage its budget, and the government would be forced to pay much more to borrow money.”
The report further said that debt has gone from 40 percent of the GDP at the end of 2008 to a projected 62 percent by the end of this year. If the current revenue and spending course does not change, that ratio will only get worse.
“With significantly lower revenues and higher outlays, debt would reach 87 percent of GDP by 2020, the CBO projects. “After that, the growing imbalance between revenues and noninterest spending, combined with spiraling interest payments, would swiftly push debt to unsustainable levels. Debt as a share of GDP would exceed its historical peak of 109 percent by 2025 and would reach 185 percent in 2035.”
According to the White House Council of Economic Advisors, 59,000 jobs were “created or saved” in Wisconsin by the $787 billion American Recovery and Reinvestment Act, better known as the stimulus bill. Those jobs were the result of $6.4 billion made available to the state from the stimulus.
But House Minority Leader John Boehner (R-Ohio) released a policy report on Wednesday, Stuck on Stimulus: How Washington Democrats’ Spending Spree Is Destroying American Jobs, which said 3.3 million jobs have been lost in the private sector since February 2009, while 590,000 jobs were added to the public sector.
The House Republican report also said that nearly 18 months after the stimulus went into effect, “African-Americans, Hispanics, as well as low-skill and older workers are facing disproportionately high unemployment rates.”
It further reported that the national and regional jobless figures are higher than the administration predicted when the stimulus bill was enacted.
Boehner referenced the G20 Summit, where most developed countries agreed to reduce deficit spending by 2013, over the warnings of the Obama administration, which argued that too many spending cuts could harm economic recovery.
“While the rest of the world seems dialed in on the need to rein in spending and impose fiscal discipline, Washington Democrats are still stuck on ‘stimulus,’” Boehner wrote in the foreword of the report.
“Rather than face facts and make tough choices, Washington Democrats have chosen to cling cluelessly to their discredited ‘stimulus’ philosophy,” the report reads. “To keep their spending spree going, Democrats have flat-out cancelled the federal budget for the first time in modern history at a time when a fiscal blueprint has never been more badly needed.”
Obama did not have kind words for Republicans in Wisconsin.
“We already tried the other side’s ideas,” the president said. “We already know where their theories led us. And now we have a choice as a nation. We can return to the failed economic policies of the past, or we can keep building a stronger future. We can go backward, or we can keep moving forward. I don’t know about you, but I want to move forward.”
“In Washington, nearly a decade of tax breaks for millionaires and billionaires led to little more than sluggish job growth and a smaller middle class,” Obama said. “And for all the other party’s moralizing about fiscal discipline, these economic policies also turned a $237-billion surplus into a $1.3 trillion deficit.”
In a separate statement, Boehner said the president should focus on repealing his “job-killing agenda,” the health care overhaul, and plugging the oil leak rather than engaging in political attacks.
“Attacking Republicans is a lot easier than explaining to the citizens of Racine, who face 14 percent unemployment, why one in every 10 Americans in our workforce is unemployed nearly 18 months after the president’s trillion-dollar ‘stimulus’ spending bill was enacted,” Bohner said.