What Growing Deficits Could Do to the Debt-to-GDP Ratio

Last week CBO released its latest report on the long-term budget outlook. (For a quick overview of the report, take a look at The 2014 Long-Term Budget Outlook in 26 Slides.) Previous blog posts have highlighted the projected imbalance in federal spending and revenues over the next 25 years. Today’s post explains how projected shortfalls would accumulate over time if current laws remained generally unchanged, causing federal debt to grow faster than the economy, and discusses the consequences of such large and growing federal debt. A blog post tomorrow will discuss the magnitude of policy changes that would be needed to meet various possible goals for federal debt.

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