US debt prices heading towards record this decade, CBO warns

The federal debt as a share of the U.S. economy is poised to hit a record in 2029 and will continue to rise over the next three decades, the nonpartisan Congressional Budget Office said Wednesday in a report laying out the nation’s long-term budget problems . .

In its latest 30-year outlook, the budget agency warned that rising debt levels will pose “significant risks” to the U.S. economic outlook in coming years, raising interest payments to foreign bondholders and slowing economic growth. By 2054, the cost of interest payments on debt will double to 6.3 percent of gross domestic product, and spending on social safety net programs will account for more than half of the country’s remaining expenditures.

The report outlines the country’s long-term budget problems, at a time when the United States continues to borrow heavily to pay for increased federal spending, along with rising interest payments on its debt. The aging population is expected to put further pressure on government coffers as more Americans become eligible for Social Security and Medicare in the coming years.

Debt as a percentage of gross domestic product is expected to rise to a record high of 107 percent in 2029 and to 166 percent in 2054.

The budget office also upgraded its growth outlook for the next three decades, based largely on labor force growth due to increased immigration.

It can be difficult to predict the long-term outlook because geopolitical events and public health crises can lead to dramatic swings in spending and production. The CBO report assumes that the 2017 tax cuts, which are expected to expire in 2025, will disappear at that time, leading to savings for the government. However, it is highly likely that many of these tax changes will be extended and could worsen the federal deficit.

The CBO projected deficits were smaller than forecasts last June due to annual spending limits imposed by the Fiscal Responsibility Act of 2023. Lawmakers are working on a new $1 trillion spending bill that President Biden could soon sign into law addressing this satisfies. to those limits.

Budget watchdogs continue to warn that lawmakers are overlooking a looming crisis by not tackling the national debt more aggressively.

“This is yet another reminder that politicians are prioritizing political priorities over the long-term health of the country,” Maya MacGuineas, chair of the Committee for a Responsible Federal Budget, said in a statement.. “There is no way to look at these eye-popping numbers and not realize that we need to make a change.”

Deficit reduction has proven to be a challenge for lawmakers of both parties, especially because of resistance to restructuring social safety net programs like Social Security and Medicare.

The White House budget last week called for tax hikes on corporations and the wealthy, which could cut the budget deficit by $3 trillion over the next decade. Former President Donald J. Trump had promised in 2016 to wipe out the national debt in eight years, but oversaw a bigger budget deficit while in office and promised more tax cuts if re-elected.