The Hill News

The risk of a debt crisis along the lines of the kind being experienced in Europe will increase as long as the debt increases, the Congressional Budget Office (CBO) said Tuesday. 

The CBO said in a new report that while it was impossible to predict whether the United States would encounter a debt crisis like those plaguing some European nations, the longer debts and deficits go unaddressed, the greater the risk of a crisis.

“Unfortunately, there is no way to predict with any confidence whether and when such a crisis might occur in the United States; in particular, there is no identifiable tipping point of debt relative to GDP indicating that a crisis is likely or imminent.” a new CBO report said. “But all else being equal, the higher the debt, the greater the risk of such a crisis.”

The CBO’s warning comes less than 100 days before congressional elections in which the growing debt and deficits are a larger consideration for voters. A number of Republican lawmakers and candidates for office have warned of a second financial crisis spurred by debt, likening the situation in the U.S. to the situation facing Greece.

Those nations have had to embark on aggressive austerity packages to get their debt under control after several European Union members struggled with their debt levels, a development that weakened the Euro. 

The options in the U.S. to address such a crisis would be “limited and unattractive,” CBO Director Douglas Elmendorf wrote. Those options include changing the terms of the debt, inflating the dollar and adopting an austerity package like those sought in Europe. 

Sen. John McCain (R-Ariz.) endorsed on Tuesday the cuts sought by British Prime Minister David Cameron in that nation’s austerity package. 

“That’s the way that we need to do it,” McCain said of the British example on KFNN radio in Arizona. “Cut spending, cut the size of government.”

McCain did not address the tax increases that were part of Cameron’s package, though President Obama’s fiscal commission may do so when it issues its report in December. 

House and Senate leaders have promised an up-or-down vote on whatever recommendations the commission makes to address the long-term debt.