US Government Debt Different - Finance Department - University of ...

James Kwak 12911Can the United States AchieveFiscal Sustainability? Will We?James KwakBy any conventional measure, the fiscal outlook for the United Stateshas deteriorated significantly in the past four years. In the wake ofthe global financial crisis that began in 2007 and peaked in 2008, officialCongressional Budget Office (CBO) projections of the nationaldebt increased by more than forty percentage points of GDP, largelydue to a decline in tax revenues because of the economic downturn. 1The federal government ran annual deficits well above $1 trillionin 2009, 2010, and 2011—at 10.1 percent, 9.0, and 8.7 percentof GDP, respectively, the largest deficits since World War II. 2 Thefinancial crisis and ensuing recession accelerated a long-term increasein the national debt that had already been expected because of an ag-1 The CBO’s baseline projection for publicly held national debt at the end of the2018 fiscal year increased from 22.6 percent of GDP in January 2008 to 67.0 percentin August 2009. CBO, The Budget and Economic Outlook: Fiscal Years 2008to 2018, January 2008, Summary Table 1, p. xii; CBO, The Budget and EconomicOutlook: An Update, August 2009, Summary Table 1, p. x. As of January 2012, evenafter the passage of the Budget Control Act of 2011, the 2018 debt projection wasstill at 66.8 percent of GDP. CBO, The Budget and Economic Outlook: Fiscal Years2012 to 2022, January 2012, Table 1-3, p. 10. By law, the CBO baseline projectionmust follow certain rules that make it unrealistic. Because these rules are consistent,however, the CBO baseline projection is often the best way to compare the government’sfiscal position at different points in time.2 OMB, Fiscal Year 2013 Budget of the U.S. Government: Historical Tables, Tables1.1, 1.2.