As the coronavirus pandemic continues to wreak havoc on the global and domestic economies, the United States is facing a looming debt crisis. According to a new report from the Congressional Budget Office (CBO), Congress must act soon in order to avoid a catastrophic debt default.
The report, released on Monday, warns of the potential risks associated with the US’s growing debt burden. As of July 2020, the US national debt had reached a staggering $26 trillion, with the debt-to-GDP ratio now exceeding 120% — a level not seen since World War II. The CBO’s analysis suggests that the current trajectory is unsustainable and that the US could face a debt crisis within a few years if Congress fails to act.
The report recommends a number of measures that Congress should take to reduce the risk of a debt default. These include enacting fiscal policies to reduce the deficit and debt levels over the long term, and reforming the government’s borrowing authority to prevent it from being used to finance deficit spending. In addition, the CBO suggests that Congress should consider raising taxes on high-income earners and corporations, as well as cutting spending on entitlement programs.
The report also warns of the potential consequences of inaction. If Congress fails to act, the US could face a debt default, which could have devastating economic repercussions. A default could trigger a global financial crisis, as investors flee the US markets and the value of the US dollar plummets. This, in turn, could lead to a recession and higher levels of unemployment.
The report’s findings are a stark reminder of the need for Congress to act now to reduce the risk of a debt default. While the economic and financial consequences of inaction would be devastating, the CBO also states that swift action now could help the US avoid a crisis and get its finances back on track. It remains to be seen whether Congress will heed the CBO’s warnings and take the necessary steps to avert a debt default.