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We are about to embark on a perilous fiscal journey that will result in the accumulation of more debt than we racked up during World War II, but unlike during the great war, we will have nothing to show for it at the end.
Yesterday, the Committee for a Responsible Federal Budget posted an analysis showing that the budget deficit will top $3.8 trillion this year. It further found that by the end of the fiscal year, the public share of the debt will exceed the size of our economy. By the end of FY 2023, the size of the debt relative to the economy will exceed the highest levels of the WWII-era.
This dire warning already factors in an assumption that “the economy experiences a strong recovery in 2021 and fully returns to its pre-crisis trajectory by 2025.” It further assumes that no other spending bills will be passed, even though both the president and Congress have already signaled this is just the beginning.
The highest level of public debt was in 1946 when the tab topped 106 percent of GDP. 2020 began with a public debt level of 79 percent of GDP, which means the debt will grow much quicker than it did during WWII. As recently as 2008, the debt-to-GDP ratio was 32 percent.
But remember, this analysis only accounts for the public share of the gross federal debt and doesn’t include the intragovernmental debt, the other component of the total debt. Intragovernmental debt includes money owed to other federal agencies and accounts, most prominently the nonexistent Social Security Trust Fund, as well as accounts holding pensions for military veterans and government workers. When you factor in that share, the debt was already sitting at 107 percent of GDP – close to the 117% record set in 1946 – even before this crisis.Read the rest from Daniel Horowitz HERE.
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