The Congressional Budget Office released 10-year estimates showing the national deficit will hit $1 trillion in 2020, and while the figure alone is alarming, it's not the most concerning aspect of the report. Analysts believe the amount of federal debt held by the public will rise from 81 percent in 2020 to 98 percent in 2030, which could lead to a financial crisis.
What you should know:
1. CBO analysts said the amount of federal debt held by the public could increase to 180 percent by 2050, far exceeding the highest amount ever recorded in the U.S. If the projections hold true, the debt would reduce national savings and income rates, increase federal interest payments and limit national emergency response funds. The CBO said these elements "increase the likelihood of a financial crisis."
The CBO called the country's fiscal outlook for the next 30 years "daunting" based on the above assumptions, and while projections could change, analysts feel that federal debt will continue to grow at a dangerous pace due to current legislation and spending habits.
2. As for the deficit, the CBO estimates said the $1 trillion dollar figure is 4.6 percent of U.S. gross domestic product. Analysts believe the gap between spending and revenues will increase to 5.4 percent, which is the first time the gap will reach that level since a six-year period during and after World War II.
If current laws remain unchanged, this 10-year period would be the first and longest time in U.S. history that the deficit would be above 4 percent of GDP. Since the CBO's August estimates were released, the agency increased its deficit projections for 2020 by 0.7 percent, or $8 billion.
3. The CBO believes baseline revenue projections will hit $3.6 trillion in 2020, which is 16.4 percent of the GDP. Analysts expect revenues to increase to 18 percent of GDP by 2030.
4. To reverse course on the rising federal debt levels, the CBO said lawmakers "will have to make significant changes to tax and spending policies — increasing revenues more than they would under current law, reducing spending below projected amounts, or adopting some combination of those approaches."
5. Concerning major health programs, the CBO projects the nation spending $19.2 trillion on healthcare through 2030, with some $1.3 trillion in spending projected for 2020.
Read the entire report here.