The Congressional Budget Office has issued its Budget and Economic Outlook for Fiscal Years 2011 through 2021. Here’s the quick summary of what they anticipate in that short term:

Under current law, CBO projects, budget deficits will drop markedly over the next few years—to $1.1 trillion in 2012, $704 billion in 2013, and $533 billion in 2014. Relative to the size of the economy, those deficits represent 7.0 percent of GDP in 2012, 4.3 percent in 2013, and 3.1 percent in 2014. From 2015 through 2021, the deficits in the baseline projections range from 2.9 percent to 3.4 percent of GDP.

Sounds good, right? At least until you read the next paragraph….

The deficits that will accumulate under current law will push federal debt held by the public to significantly higher levels. Just two years ago, debt held by the public was less than $6 trillion, or about 40 percent of GDP; at the end of fiscal year 2010, such debt was roughly $9 trillion, or 62 percent of GDP, and by the end of 2021, it is projected to climb to $18 trillion, or 77 percent of GDP. With such a large increase in debt, plus an expected increase in interest rates as the economic recovery strengthens, interest payments on the debt are poised to skyrocket over the next decade. CBO projects that the government’s annual spending on net interest will more than double between 2011 and 2021 as a share of GDP, increasing from 1.5 percent to 3.3 percent.

But then, they admit to being really optimistic, because that rosy scenario assumes:

• that the government will drastically cut payments to doctors for their treatment of Medicare patients;
• all unemployment benefit extensions will expire at the end of 2011;
• the tax cuts that were just extended will expire at the end of 2010; and
• that the federal government’s “discretionary” spending slows to the rate of inflation.

Let’s see what the CBO anticipates for the nation’s deficits and debt if politicians continue as they have and don’t allow these things to happen:

For example, if most of the provisions in the 2010 tax act that were originally enacted in 2001, 2003, and 2009 or that modified estate and gift taxation were extended (rather than allowed to expire on December 31, 2012), and the alternative minimum tax was indexed for inflation, annual revenues would average about 18 percent of GDP through 2021 (which is equal to their 40-year average), rather than the 19.9 percent shown in CBO’s baseline projections. If Medicare’s payment rates for physicians’ services were held constant as well, then deficits from 2012 through 2021 would average about 6 percent of GDP, compared with 3.6 percent in the baseline. By 2021, the budget deficit would be about double the baseline projection, and with cumulative deficits totaling nearly $12 trillion over the 2012–2021 period, debt held by the public would reach 97 percent of GDP, the highest level since 1946.

And that’s only debt held directly by the public. That doesn’t include intragovernmental holdings (the debt that the government “owes” Social Security), nor does it include the government’s borrowing to issue student loans or the ongoing bailouts of banks, financial institutions, and government-supported enterprises like Fannie Mae or Freddie Mac – all of which add to the government’s total public debt outstanding.