The budget outlook in the U.S. is "daunting" and the federal debt will reach about 70 percent of gross domestic product (GDP), the highest level since World War II, according to a report released by the U.S. Congressional Budget Office (CBO) Wednesday.

"Recently, the federal government has been recording budget deficits that are the largest as a share of the economy since 1945," the CBO's 2011 Long-Term Budget Outlook report said. "Consequently, the amount of federal debt held by the public has surged."

The CBO said, at the end of 2008, that debt equaled 40 percent of the nation's annual economic output. Since then, the figure has shot upward.

The sharp rise in debt stems partly from lower tax revenues and higher federal spending related to the recent severe recession. However, the growing debt also reflected an imbalance between spending and revenues that predated the recession, the report said.