The Congressional Budget Office on Wednesday released a bleak outlook for the federal government with new projections that show debt levels will reach their highest levels ever in five years.
“Debt held by the public, boosted by the large deficits, reaches its highest level ever in 2029 (measured as a percentage of GDP) and then continues to grow, reaching 166% of GDP in 2054 and remaining on track to increase thereafter,” according to the CBO report. “That mounting debt would slow economic growth, push up interest payments to foreign holders of U.S. debt, and pose significant risks to the fiscal and economic outlook; it could also cause lawmakers to feel more constrained in their policy choices.”
The CBO further projected that the Social Security Old-Age and Survivors Insurance trust fund will be exhausted in 2033, the Medicare Hospital Insurance trust fund in 2035, and the Highway Trust Fund in 2028.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said the new report should serve as a wake-up call for Congress.
“This is yet another reminder that politicians put political priorities ahead of the long-term health of the country,” she said. “There is no way to look at these eye-popping numbers without realizing we need to make a change. And yet we have lawmakers promising what they won’t do: I won’t raise taxes, I won’t fix Social Security, I won’t pay for all the things I do want to do. And so we continue on this dangerous path.”
MacGuineas said neither President Joe Biden nor former President Donald Trump have been talking about solutions on the campaign trail ahead of the 2024 presidential election.
“So far, the presidential campaign is not offering any hope – candidates need to be asked how they would fix Social Security, fix Medicare, and bring the debt back to manageable levels,” she said. “Voters should not be satisfied without specific answers.”
The CBO report found that “interest costs more than double in relation to GDP between 2024 and 2054, driven by rising interest rates and growing debt.”
“Those costs reach 6.3% of GDP in 2054 and are larger in every year than their average of 2.1% of GDP over the past 50 years,” according to the report. “Higher interest rates account for about two-thirds of the projected rise in net interest costs over the 2024–2054 period; primary deficits account for the rest.”
MacGuineas said the biggest concern is the rising cost of interest.
“The scariest part of our grim fiscal outlook is rising interest costs. Those costs have already doubled as a share of the economy since 2015, and this year CBO believes interest will cost more than defense spending or Medicare,” she said. “By 2053, interest costs will double again after becoming the single largest line item in the entire federal budget in 2051. This year, we will spend $870 billion on interest – more than all the federal dollars we spend on children – and that number will only grow from here.”
