Obama's Debt Boom:
Remember a week or two ago, when President Obama was claiming to be a fiscal skinflint because some online columnist said so? That was fun. On Tuesday the Congressional Budget Office released a view more tethered to reality, and let's just say this will not be showing up in one of the President's campaign ads.
The CBO's long-term budget outlook notes that federal debt held by the public—the kind we have to pay back—will surge to 70% of the economy by the end of this year. That's the highest share of GDP in U.S. history except World War II, as the nearby chart indicates, higher than during the Civil War or World War I. It's also way up from 40% in 2008 and from the 40-year average of 38%.
And it's rising fast. CBO says that on present trend the national debt will hit 90% of GDP by 2022. It then balloons to 109% by 2026—that would be the all-time WWII peak—and approaches almost 200% of GDP by 2037.
We have never been deficit scolds, preferring to focus on the more important policy priorities of economic growth and spending restraint. But the Obama era is taking America to a place it has never been. Inside of a decade the country will have a debt-to-GDP ratio well into the 90% to 100% danger zone where economists say the economy begins to slow and risks mount.
A lot of talk about the debt focuses on the immense size of its numbers ($15 trillion dollars plus and a cool 50K per American citizen), but the real threat that the debt posed is not its size alone, but it's size relative to the rest of the economy. The fact that the percentage of debt to the economy has gone from 40% to 70% in four years is staggering. But the fact that it's on pace to get to 90% within ten years is even more ominous. That's when the rubber will really meet the road and talk about the dangers of the debt will no longer be merely speculative.