The $1.079 trillion deficit now projected for this fiscal year ending Sept. 30 is a step backwards from what CBO had predicted in August. And to punch home its message, the non-partisan agency outlines an especially grim scenario in which Congress not only extends all the current Bush-era tax cuts but pulls the plug on the $1.2 trillion in sequester set in motion by the Budget Control Act last summer.
Under this scenariowhich cant be ruled out politicallydeficits would stubbornly hover just under $1 trillion through 2017, adding another $4.7 trillion altogether to the mounting federal debt.
Under the more prudentand many would say unrealistic scenario of ending tax breaks and implementing cuts, the cumulative deficits would be $1.72 trillion or $3 trillion less from 2013-2017. But even this path comes with a warning from CBO: that debt service costs are already on the rise and will command an ever greater share of the annual budget.
The federal budget remains out of balance throughout the decade, the report reads. The resulting accumulation of debt, along with rising interest rates, drives up the cost of financing that debt; in CBOs projections, net interest costs grow significantly from 1.4 percent of GDP this year to 2.5 percent in 2022.
To put this in some perspective, by 2017, annual interest payments on the debt would begin to rival and soon exceed what Washington will be spending on Medicaid, the state-federal healthcare program for the poor and disabled.
