CBO: Federal debt to double in 15 years

The federal government is staring at a disastrous fiscal picture with debt approaching 200 percent of GDP within two decades if Congress doesn't change course on spending and taxes, according to the latest analysis by the Congressional Budget Office released Tuesday.

The CBO said it's the worst picture since a brief period during World War II when spending ballooned to fund the military campaign.

"In the past few years, the federal government has been recording the largest budget deficits since 1945, both in dollar terms and as a share of the economy. Consequently, the amount of federal debt held by the public has surged," the CBO report said in a long-term budget outlook that paints a shockingly dark picture of government finances.

CBO analysts said the downturn and Congress's response have been devastating for the government. Federal debt as a percentage of GDP - a standard measure of a government's debt burden - stood at 40 percent at the end of 2008. But it will top 70 percent by the end of this year, and is only headed higher unless Congress changes course. The ratio could double by the middle of the next decade and will have topped 200 percent of GDP - twice the size of the projected U.S. economy - by 2037.

At that level, fiscal catastrophes are more likely, and the government's ability to respond becomes far more constrained.

The increases in federal spending will come chiefly from higher interest payments and health care costs. Federal spending on health will nearly double from about 5.4 percent of GDP to 10.4 percent by 2037, according to Tuesday's report.

Ironically, the nonpartisan budget agency said the deep deficits and debt are not inevitable. If Congress would step out of the way and allow the laws currently on the books - including ever-deeper spending cuts and potentially devastating tax increases - to go into effect, federal debt would begin to shrink almost immediately as a percentage of the economy, as measured by GDP.

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