The nonpartisan Congressional Budget Office (CBO) called for "large and timely policy changes" on Tuesday after releasing a report showing that the U.S. debt will be almost two times the size of the nation's economy by 2037 if changes aren't made.
The CBO predicts that by the end of the year, debt will be about 70 percent of the economy. In 1946, the debt was at 109 percent after World War II, and the United States could reach that level in the next 15 years.
One of the challenges the federal government faces is an increase in spending for programs such as Social Security, due to a large number of Baby Boomers retiring and life expectancy increasing.
The CBO said if something isn't done, the debt increases could lead to a fiscal crisis in which the United States would not have the ability to borrow money at affordable rates.
Two possible scenarios were studied by the CBO. In the extended baseline scenario in which current laws remained unchanged, such as the Bush-era tax cuts and a temporary Social Security payroll tax cut expiring and $1 trillion in scheduled spending cuts coming into play, the amount of debt in 2037 would be about 53 percent of GDP, lower than it is today.
In the extended alternative fiscal scenario, where current policies prevail and tax cuts are extended, the debt load would increase to 199 percent of the U.S. economy.
The CBO said in the extended baseline scenario, spending will continue to rise, but revenues will increase to all-time highs, whereas in the alternative fiscal scenario, revenues will stay at historical averages, according to a release.
The budget office also looked at the differing impacts on the economy based on how fast the debt is paid off. If debt is paid off with gradual tax increases and spending cuts over a long period of time, debt will continue to increase over time. But, if debt is paid off with abruptly implemented tax increases and spending cuts, it will be paid off quicker, but that could negatively affect working families and businesses.