... “Just holding federal debt at its current high level of 74 percent of GDP in 2040 would require significant changes in tax and spending policies,” [Congressional Budget Office Director Keith] Hall testified. “The combinations of increases in federal tax revenues and cuts in non-interest federal spending relative to current law of about 1.1% of GDP in each year for 25 years would be needed.
“In 2016, this would be a spending and/or a tax revenue increase totaling about $210 billion dollars--and then more than that in each year after that,” said Hall.
“If those changes came from increases of equal percentage in all types of revenues they would represent an increase of 6 percent relative to current law for each year between 2016 and 2040,” Hall testified.
“In 2016, for example, an average middle-income household would have to pay $750 more in taxes and more than that in each year afterwards,” he said.
“Or if the changes came from cuts of equal percentage in all types of non-interest spending, that spending each year would have to be 5.5 percent less than projected,” he said. “If the reduction was applied across the board to all types of non-interest spending, an average 65 years old in the middle of the earnings income who retires in 2016 would see a reduction of about $1,050 in his or her initial annual Social Security benefits—more than that in each year afterwards.”
“The more ambitious goal of returning public debt by 2040 to its average level over the past half century, which is 38 percent of GDP, would require more than that,” Hall said. “This would require a revenue increase and/or non-interest spending decrease totaling 2.6 percent of GDP every year.
“This means an average middle income household would have to pay $1,700 more in federal taxes in 2016 and larger amounts in subsequent years,” he said. “Or by cutting non-interest spending across the board, average Social Security benefits for a 65-year-old in the middle of the earnings distribution would have to drop by $2,400 in 2016 and by larger amounts in later years.”