The national debt is set to “grow far beyond any previously recorded level over the next 30 years,” the Congressional Budget Office said Thursday. At the same time, the nonpartisan budget scorekeeper said that it now expects that both the deficit and federal debt held by the public will somewhat lower in 2054 than it projected last year.
CBO’s latest Long-Term Budget Outlook said that, under current law, debt held by the public — what the government owes to entities outside of the federal government, including individuals, businesses, state and local governments, foreign governments and more — will rise from 100% of gross domestic product at the end of this fiscal year to 107% of GDP in 2029, topping the high reached after World War II. It then continues to grow, hitting 156% of GDP by 2055.
“That large and growing debt has significant economic and financial consequences,” the CBO report warns. “Over time, it slows economic growth, drives up interest payments to foreign holders of U.S. debt, makes the nation’s fiscal position more vulnerable to an increase in interest rates, heightens the risk of a fiscal crisis, and increases the likelihood of other adverse outcomes.”
As a share of the economy, the deficit is projected to climb from 6.2% this year to 7.3% by 2055. “Deficits average 6.3% of GDP over the 30-year period, which is 2.5 percentage points more than they averaged over the past 50 years,” CBO says.
Net interest payments, the fastest growing part of the budget, are seen growing from 3.2% of the economy in 2025 to 5.4% by 2055. “If interest costs followed their projected path, net interest outlays would exceed all discretionary outlays in 2052,” the report says.
The report also projects that economic growth will be slower over the next three decades than over the past three decades, in part because of slower population growth and declining participation in the labor force. “Without immigration, the U.S. population would begin to shrink in 2033,” it notes.
The debt outlook has shifted quite a bit since last year, though. “Federal debt held by the public in 2054 is now projected to be 12 percent of GDP less than it was projected to be in last year’s report, and the deficit is now projected to be 1.3 percent of GDP less,” the new report says. “Lower spending, particularly for net interest costs and Medicare, and higher revenues in CBO’s current projections result in smaller debt and deficits.”
The report comes as the Trump administration and Republicans in control of Congress are working to enact a massive package including trillions of dollars in tax cuts and spending reductions. CBO’s analysis doesn’t factor in those GOP tax plans or the effects of Trump’s tariffs and various other economic policies his administration is pursuing.
An extension of expiring 2017 tax cuts would add more than $37 trillion to the national debt over the next 30 years, according to the nonpartisan Committee for a Responsible Federal Budget (CRFB), which advocates for deficit reduction. CBO estimated last week that debt held by the public will soar to 214% of GDP over the next 30 years, nearly 50% higher than its baseline forecast, if Republicans make their 2017 cuts permanent.
“CBO reports like this routinely present a sobering assessment of the dismal state of America’s finances,” said CRFB President Maya MacGuineas, “and our political leaders nod their heads in agreement that we need to do something. And then they do nothing, or even worse — they claim their priorities are too important to let the threat of higher debt get in the way of enacting their agenda.”