WASHINGTON -- Federal spending in the United States now accounts for nearly 20 percent of the U.S. economy's annual output, and it's got a lot higher to go.

Comptroller General David Walker, whose report also says Washington now collects 16.2 percent of the gross domestic product in taxes, predicts that by 2040 the deficit will be nearly 30 percent of GDP, assuming President Bush's tax cuts are made permanent and spending rises at the same rate as the economy, the Chicago Tribune reported Monday.

Walker says the fiscal time bomb can only be defused with radical, painful surgery.

Taxes will have to be raised 250 percent, government programs will have to be cut sharply or the enormous U.S. debt will reduce the United States to the economic equivalent of a Third World nation.

By 2040 -- if nothing is done -- interest on the federal debt alone will total nearly half of all federal spending.

Copyright 2004 by United Press International