Analysis

May 2011 Update: Paths for Reducing the Federal Debt

  • May 25, 2011

In September 2010, the Pew Fiscal Analysis Initiative released No Silver Bullet: Paths for Reducing the Federal Debt, which analyzed the implications of rising federal debt and modeled different remedies for reducing it to 60 percent of gross domestic product (GDP) in fiscal years 2025 or 2035. Since then, the Congressional Budget Office (CBO) has updated its 10-year projections to reflect the most recent economic data as well as the cost of new legislation enacted after August 2010.

Using the latest CBO data and certain revised assumptions, Pew’s new projections estimate that, absent any corrective action, publicly held federal debt will reach 111 percent of GDP by 2025, the highest level in American history.

Download the full May 2011 addendum.

Reducing the debt in 2025 to sustainable levels by only cutting discretionary spending would now require a 70 percent across the board cut in 2016 (the earlier report showed that a 43 percent cut was required in 2015). By contrast, if all spending and taxes were on the table and adjusted equally, the new required permanent spending cut and tax hike would be about 12 percent across the board in 2016 (7.5 percent in 2015 in the earlier report).

Date:
May 25, 2011
Issues:
Deficit Reduction
 
X

Related RESEARCH & ANALYSIS

PCS.PRODUCTION.1.20140221.1210 (PEWSUWVMWAPP02)