The national debt will be nearly twice as large as the U.S. economy in 30 years, the U.S. Congressional Budget Office projects.
That figure assumes no new major spending projects from Congress in that time, which is unlikely, meaning that debt levels could actually rise much more quickly. Conversely, Congress could slow that trend by cutting spending.
“By the end of 2023, federal debt held by the public equals 98 percent of GDP,” the report said. “Debt then rises in relation to GDP: It surpasses its historical high in 2029, when it reaches 107 percent of GDP, and climbs to 181 percent of GDP by 2053.”
CBO found that deficits are poised to soar as well.
“In CBO’s projections, the deficit equals 5.8 percent of gross domestic product (GDP) in 2023, declines to 5.0 percent by 2027, and then grows in every year, reaching 10.0 percent of GDP in 2053,” the report said. “Over the past century, that level has been exceeded only during World War II and the coronavirus pandemic.”
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, responded to the CBO projections, saying “there is still a tremendous amount of work needed to put our fiscal situation on sound footing.”
MacGuineas said the fast growth of Medicare, Social Security and interest on the debt are particularly problematic.
As The Center Square previously reported, the interest payments on the national debt are projected to exceed the cost of U.S. spending on national defense within a decade.
“Though the Fiscal Responsibility Act was an important step forward, it can only be the start of our efforts to get the debt under control,” MacGuineas said. “The FRA didn’t address health care, Social Security, or tax revenue. There is no way to put our debt on a sustainable course without looking at these three parts of the budget.”
Policymakers need to stop demagoguing Social Security and Medicare and start leveling with the American people about the serious challenges these programs face.
Macguineas said that within a decade, the trust funds for Medicare, Social Security and highways “will face insolvency.”
“If allowed to occur for Social Security, that will mean a 26 percent across-the-board benefit cut for all seniors, regardless of how much they depend on the program,” she said.
The CBO report said the higher debt levels will have serious economic consequences.
“Such high and rising 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 report said.
CBO said it will also lead to higher inflation and “erode confidence in the U.S. dollar as the dominant international reserve currency.”
“There would be an elevated risk of a fiscal crisis – that is, a situation in which investors lose confidence in the U.S. government’s ability to service and repay its debt, causing interest rates to increase abruptly, inflation to spiral upward, or other disruptions to occur,” the report said.
