Congressional Budget Office

On the same day House Speaker John Boehner said he would bring a “clean” debt ceiling bill to the House floor — and join Democrats in voting for a 13-month extension of the debt limit — the head of the Congressional Budget Office declared that the “large and growing federal debt” could eventually increase the risk of a “fiscal crisis.”

“The large budget deficits recorded in recent years have substantially increased federal debt, and the amount of debt relative to the size of the economy is now very high by historical standards,” Elmendorf told the Senate Budget Committee.

“CBO estimates that federal debt held by the public will equal 74 percent of GDP at the end of this year and 79 percent in 2024 (the end of the current 10-year projection period). Such large and growing federal debt could have serious negative consequences, including restraining economic growth in the long term, giving policymakers less flexibility to respond to unexpected challenges, and eventually increasing the risk of a fiscal crisis (in which investors would demand high interest rates to buy the government’s debt)

We should note that Elmendorf is actually understating the nation’s debt by referring only to the portion held by the public. With the ongoing depletion of the Social Security Trust Fund, much of the so-called intragovernmental portion of the national debt will be increasingly transformed into federal debt held by the public over time, because Social Security won’t be able to collect enough in payroll taxes from what the CBO now believes will be a much smaller number of wage and salary earners to be able pay out Social Security benefits at promised levels, without borrowing significantly more money to make up the difference.

Which of course, is part and parcel of how a national debt death spiral would start.