The agency’s 2011 long-term budget outlook showed that federal debt would begin to hurt the economy once it reaches about 77% of GDP. CBO’s January budget and economic outlook estimated that it will hit that level in 2013 under its high-debt scenario that is based largely on current policy.
“CBO expects that the large government deficits during the recession and afterward will raise the cost of capital in the future . . . constraining investment,” the nonpartisan scorekeeper wrote in its January budget and economic outlook.
Initially, the impact would be minimal, but it would grow over time as debt levels increase.