In recent years the U.S. government increased its debt more sharply than most other large, wealthy countries did. The non-partisan Council on Foreign Relations (CFR) warns in a new report that the federal government’s “unsustainable long-term debt trajectory” threatens future economic growth and prosperity.
“In 2000, the United States had a lower debt burden that most of the rest of the Group of Seven (G7) members, but by 2014 it had nearly caught up to the G7 average,” the report notes. And while Washington’s debt-to-GDP ratio is projected to be “relatively flat” in the near term, CFR points out that “it will grow rapidly again in about a decade as entitlement spending rises with the aging population.”
CFR says it considers an outright federal default less likely than a gradual economic slowdown as public debt “consumes private investment that may be more productively spent elsewhere.” The organization also worries that federal finances could put upward pressure on interest rates, raising costs not only for the government but for businesses, home buyers and other consumers as well.
Echoing the concerns of The Concord Coalition and various other non-partisan organizations, CFR faults Washington’s short-sighted response to rising federal debt: “Spending on entitlement programs such as Medicare and Social Security, which are becoming increasingly costly, has been left mostly untouched while discretionary spending, which was set to decline anyway, has been slashed. Although these cuts did lower the near-term debt level, they did little to alter the long-term debt trend.”
Balance Owed: Federal Debt and Deficits (CRF)