Federal deficits are projected to skyrocket over the next decade, resulting in a national debt that could be 107% of U.S. GDP, based on a recent Congressional Budget Office report.
The United States' debt reached 100% of GDP during the past fiscal year largely because of the federal response to the coronavirus pandemic and the $2.2 trillion CARES Act passed in March 2021. As the CBO's February report projects unprecedented deficits, they are smaller than the office's projections from last summer because of the country's promising economic outlook.
According towards the office's recent report, deficits accumulating within the next decade will total approximately $12.6 trillion, that is 3% less than last summer's projections. Despite continued economic recession and high unemployment due to the pandemic, the CBO attributed the slight decline to stronger-than-expected business activities and higher inflation and rates of interest, all of which will increase tax revenue more than government spending.
Congressional Republicans have seized on the relatively strong economic numbers as reason to oppose President Joe Biden's $1.9 coronavirus relief package and instead curb federal spending. The sweeping aid bill allocates hundreds of billions of dollars towards stimulus checks, vaccine distribution and administration, state and local aid and more.
Congressional Democrats plan to use budget reconciliation to pass through the bill, which allows the bill to bypass the 60-vote Senate filibuster and instead reach Biden's desk with simple majorities in each chamber. Democrats, who hold narrow majorities in the House and Senate, have vowed to pass through the bill by mid-March when unemployment benefits lapse, and appearance to have the votes to do so.
The CBO projected the deficit for 2021 would reach $2.3 trillion. While much less than the deficit in 2021, it's 25% higher than the agency's projection from last summer largely because of the $900 billion relief package passed in December.
The 2021 deficit is projected to total 10.3% of the United States' economic output, less than the 14.9% in 2021 however the second-highest since World War II, the report said.
Despite the record deficit projections, Biden's administration has argued that more short-term spending to prevent long-term economic damage and instead catalyze a quicker recovery.
\”The very health of our nation is at stake,\” Biden said on Jan. 14 when he first introduced his plan. \”[It] doesn't come cheaply, but failure to do so will cost us dearly.\”