When you add the 6.4 percent of GDP in deficit spending that the CBO estimates the federal government will undertake in 2039 to the 19 percent the federal government will spend solely on Social Security, federal health programs and interest on existing debt, that equals 25.4 percent of GDP.
Similarly, when you add up all federal spending that the CBO estimates will take place in 2039 it equals 25.9 percent of GDP.
The White House Office of Management and Budget maintains an historical table that lists federal tax revenues and spending as percentages of GDP for each year from 1930 through 2013. It shows that in that 84-year span there was only one year when revenue went as high as 20 percent of GDP. That was 1944 -- at the height of World War II.
In 1943, 1944 and 1945, during the war, federal spending ran at 42.6 percent, 42.7 percent and 41.0 percent of GDP. Since then, it has never exceeded 25 percent -- and has averaged 19.3 percent.
For the federal government to balance the budget at 25 percent of GDP, it would require a sustained level of federal taxation unprecedented in American history. For the federal government to maintain the current welfare state without balancing the budget would require accumulating levels of debt unprecedented in American history.
"With deficits as big as the ones that CBO projects, federal debt would be growing faster than GDP, a path that would ultimately be unsustainable," said the CBO outlook.
"How long the nation could sustain such growth in federal debt is impossible to predict with any confidence," said the CBO. "At some point, investors would begin to doubt the government's willingness or ability to pay its debt obligations, which would require the government to pay much higher interests costs to borrow money."
"If a fiscal crisis were to occur in the United States, policymakers would have only limited -- and unattractive -- options for responding," said the CBO. "In particular government would need to undertake some combination of three approaches: restructure the debt (that is, seek to modify the contractual terms of existing obligations), pursue an inflationary monetary policy, and adopt an austerity program of spending cuts and tax increases."
We need to cut the welfare state now, not after a crash.
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