Debt as a share of the United States economy is on track to blow through the previous World War II-era record within two decades and keep rising from there, the Congressional Budget Office said in its annual long-term budget report.
Generally assuming no change in current laws, growing budget deficits would push debt held by the public from the current level of 78 percent of the economy to almost 100 percent of gross domestic product by 2028, and to 152 percent of GDP by 2048, according to the agency.
“That amount would be the highest in the nation’s history by far,” said the report, which estimates the growth of spending and revenue over the next three decades as a share of the economy. The current record for debt as a share of GDP was set in 1946 when it hit 106 percent. Debt as a share of the economy is projected to exceed that level in fiscal 2034 under the latest projections, one year earlier than in last year’s long-term budget outlook.
CBO highlighted the role that rising interest costs will have, along with the growth of Social Security and Medicare.
In a statement distributed with the report, CBO Director Keith Hall said that by 2048, “as interest rates rise from their currently low levels and as debt accumulates, the federal government’s net interest costs are projected to more than double as a percentage of GDP and to reach record levels.”
Hall said interest costs would equal spending for Social Security, currently the largest federal program, by 2048.
CBO has long warned that rising debt poses a risk to the economy, and Hall made the point again Tuesday.
“The prospect of large and growing debt poses substantial risks for the nation and presents policymakers with significant challenges,” he said in the statement.
Under current law, revenue is projected to be relatively flat over the next few years in relation to GDP, rise slowly and then jump in 2026 after certain tax cuts expire.
“After 2026, revenues are projected to keep rising in relation to the size of economy — though not to keep pace with spending growth — mostly because of increases in individual income tax receipts,” Hall said.
Compared to last year’s report, CBO’s projections of debt growth are higher through 2041 and lower thereafter. The agency projects debt as a share of GDP would be 3 percentage points lower in 2047 than projected last year. The increase in debt through 2041 stems primarily from the tax overhaul, the two-year budget deal and the fiscal 2018 omnibus spending bill, the CBO said.
If Congress extends the individual tax cuts and several other tax provisions that are set to expire at the end of 2025, as many House Republicans want to do, debt would grow even faster, according to the CBO.