Photo: Congressional Budget Office
In a report released this morning, the Congressional Budget Office offered two scenarios for long term federal borrowing through 2035.
Current law remains in effect: Congress allows the Bush tax cuts to expire, the alternative minimum tax is allowed to grow in reach, and the new health care law brings in new tax dollars. In this scenario, federal tax revenues would rise to 23 per cent of GDP — a level, the CBO says, that has not been reached in recent decades.
By 2035, federal public debt would reach 84 per cent of GDP, from 69 per cent this year.
Alternate scenario, that the CBO calls “likely”: The Bush tax cuts are extended, tax revenues remain near their recent average of 18 per cent of GDP, and Medicare’s payment rates for physicians remain at current levels, rather than declining as mandated by the health care reform law’s “doc fix.”
In this scenario, federal debt reaches an astounding 190 per cent of GDP by 2035, surpassing the historical peak of 109 per cent set during World War II by 2023.
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