Trillion-dollar deficits are on their way back, according to the Congressional Budget Office. In January the nonpartisan congressional scorekeeper released a report that said the budget deficit—that is, the annual gap between government spending and revenues—had crept up for the first time since 2009, from $439 billion in 2015 to $544 billion this fiscal year. The deficit didn't just rise in dollar terms; it also increased relative to the size of the economy, going from 2.5 percent of gross domestic product to 2.9 percent.
Over the next 10 years, the report warns, the budget deficit will continue to grow, hitting $1 trillion by 2022 and nearly tripling by 2026 to an estimated $1.4 trillion. All the while, those annual deficits will be adding to the national debt, which currently equals about 76 percent of GDP and is higher than at any point since the years immediately following World War II. After three decades on our current course, that debt is projected to reach 155 percent of GDP.
That build-up of debt increases the long-term risk of a fiscal crisis and constrains the government in a variety of ways, limiting how it can respond to emergencies and burdening it with heavy interest payments that could increase sharply if rates rise.