'Fiscal crisis' warning as deficits rise, debt set to hit $20T next year

United States one dollar bills are seen on a light table at the Bureau of Engraving and Printing in Washington November 14, 2014. REUTERS/Gary Cameron (UNITED STATES - Tags: BUSINESS POLITICS) - RTR4E70P

While the staggering national debt has virtually disappeared as a 2016 campaign issue amid White House assurances the problem has faded, D.C.’s budget scorekeepers have issued a stark warning that the red ink is growing once again – increasing the likelihood of a full-blown “fiscal crisis.”

A fresh estimate from the Congressional Budget Office projects this year’s deficit – the annual budget shortfall – will spike to $590 billion. That’s higher than a previous estimate, and up 35 percent over last year.

Further, the CBO’s numbers show the total national debt hitting $20 trillion next year.

The debt would then soar over the next decade and beyond, leading to “serious negative consequences,” the report warns, including ever-higher interest payments that would crowd out other areas of the budget.

“The likelihood of a fiscal crisis in the United States would increase,” the CBO report, issued last week, said. “There would be a greater risk that investors would become unwilling to finance the government’s borrowing needs unless they were compensated with very high interest rates.”

In the near-term, the report said the 2016 shortfall grew because of lower-than-expected revenue and some early payments that will have to be made this year.

CBO's latest report sees a slight improvement in the deficit picture over the longer term, mostly because the government is expected to pay lower interest rates on its mounting debt.

But the report is significant in that it shows the pendulum swinging – after years of falling deficits touted by President Obama, the CBO sees deficits generally rising from 2016 on.

The report projected the return of trillion-dollar deficits in eight years.

The trendlines are changing as the debt and deficit appear to fade as campaign issues or a major point of contention on Capitol Hill.

Neither presidential candidate has focused much on the deficit so far in the campaign. GOP nominee Donald Trump has called for large tax cuts but hasn't offered much in the way of cutting spending. Democratic nominee Hillary Clinton wants further tax increases on the wealthy but calls for spending the money on agenda items like infrastructure.

Obama presided over a record deficit of $1.4 trillion in his first year in office as the economy reeled and the government pumped hundreds of billions of dollars into rescuing large financial institutions. Wall Street has paid the money back, and deficits have fallen in recent years.

But Obama has devoted little effort to further tackling the deficit after a 2011 budget and debt deal with Republicans and his success in early 2013 in raising taxes on upper-income earners.

He told ABC News in 2013 that they “don't have an immediate crisis in terms of debt," claiming the country would be on a “sustainable” path for another decade.

The White House touted deficit reduction in its latest budget proposal earlier this year, claiming the proposal “keeps deficits below three percent of GDP while stabilizing debt and putting it on a declining path for most of the next decade.”

Yet the new CBO projection puts the deficit above that 3 percent mark already.

The Committee for a Responsible Federal Budget cast the CBO report as a wake-up call.

“The complacency that lawmakers have shown about debt over the past few years must end so they can address the troublesome trajectory of deficits and debt,” the group said in a statement.

In an editorial, The Wall Street Journal warned the latest estimates make campaign calls for more stimulus even more problematic.

“Thanks to ObamaCare and his refusal to reform entitlements, Mr. Obama has set the federal fisc on an even uglier path long after he’s left for a tour of the world’s great golf courses,” the newspaper wrote. “CBO says spending will keep rising and so will debt as a share of GDP.”

Asked about the latest fiscal warning last week, White House Press Secretary Josh Earnest said Obama recognizes the need to focus on the “fiscal situation” but said he is “quite proud of the record under his tenure in office of reducing our deficit by about three-quarters.”

He added, “And that's an indication that we have things moving in the right direction. But it's clear that as the population in the United States ages that there are additional steps that we're going to need to take.”

He criticized Republicans’ push for tax cuts, and went on to suggest the problem will have to be tackled by the next administration.

“There’s certainly a lot of money that can be saved, and this will be a challenge that the next President and the next Congress will have to do,” he said.

The total national debt currently stands at about $19.4 trillion, a figure that includes what the government has borrowed from other federal accounts. Counting only debt “held by the public,” the CBO still projects that figure hitting $20 trillion in eight years.

The Associated Press contributed to this report.