Slowing Economy Could Exacerbate Federal Debt Woes

If the economy doesn't pick up soon, our debt could be mcuh bigger than forecast.

Fiscal retrenchment is like driving up a steep, muddy hill in a downpour. If the economy moves too slowly, it might lose traction or even start backsliding as more debt accumulates.


Now, as the fiscal climb begins — unless Congress prolongs stimulus and tax cuts — the apparent economic downshift could make budget progress difficult.


The White House's Office of Management and Budget sees 4% average real GDP growth from 2011 to 2014. But if growth is 3%, OMB says deficits would be $2 trillion higher through 2020 than the $8.5 trillion under its baseline scenario.


A one-percentage-point shortfall in growth each year from 2010 to 2020 would raise deficits by $3.1 trillion.

Instead of a debt-to-GDP ratio of 77% in 2020, as OMB projects, the latter scenario of persistently slower growth would push that to 99%.