US debt on track to surpass $56 trillion in the next 10 years
The United States is on track to add the next tens of trillions of dollars to its national debt, borrowing money faster than previously expected, at a time when major legislative battles loom over taxes and spending.
The Congressional Budget Office said Tuesday that the U.S. national debt will surpass $56 trillion by 2034 as rising spending and interest payments outpace tax revenues. The rising cost of Social Security and Medicare continues to weigh on the nation’s finances, along with rising interest rates that have made it more expensive for the federal government to borrow large sums of money.
As a result, the United States is expected to continue running large budget deficits, which are the gap between what America spends and what it receives through taxes and other revenues. The budget deficit is expected to reach $1.9 trillion in 2024, compared to a forecast earlier this year of $1.6 trillion. Over the next decade, the annual deficit is expected to reach $2.9 trillion. As a share of the economy, public debt will reach 122 percent of gross domestic product in 2034, compared to 99 percent in 2024.
The new forecasts come as lawmakers prepare for a major fight over taxes and spending. Most of Trump’s 2017 tax cuts expire in 2025, leaving lawmakers to decide whether to extend them and, if so, how to pay for them. The United States will also once again face a legal cap on how much it can borrow. Last year, Congress agreed to suspend the debt limit and allow the federal government to continue borrowing until January of next year.
Those tax and spending battles will come at a time when the country’s financial picture is increasingly grim. An aging population continues to weigh on America’s retirement and pension programs, which are facing long-term deficits that could result in lower pension and Medicare benefits.
Both Democrats and Republicans have expressed concern about the national debt, as inflation and interest rates have soared in recent years, but spending has been hard to sustain. The CBO report assumes the 2017 tax cuts will not be extended, but that is highly unlikely. President Biden has said he will extend some tax cuts, including those for low- and middle-income earners, and former President Donald J. Trump has said he will extend them all if he wins in November. Extending the tax cuts in full could cost about $5 trillion over a decade.
The larger projected deficits were largely driven by the Biden administration’s decision to cancel more than $100 billion in student debt, the cost of new aid programs for Ukraine and Israel, and higher-than-expected Medicaid spending.
The CBO also said an agreement by lawmakers, pushed by Republicans, to recover $20 billion from the Internal Revenue Service would reduce corporate and individual income tax revenues by about $32 billion through 2034. That assumption stems from the expectation that the IRS money would be used to tackle tax fraud, resulting in more federal revenue.
The White House blamed Trump’s tax cuts for the negative numbers and warned Tuesday that Republicans will only make the numbers worse if they have power in Washington.
“Republican officials are already making plans to widen the budget deficit even further in 2025 with tax handouts to the companies that keep prices high even as inflation falls,” said Andrew Bates, a White House spokesman.
High interest rates also make it harder for the US to control its debt burden. The budget office predicts that annual interest costs will rise from $892 billion this year to $1.7 trillion in 2034. At that point, the U.S. would spend about as much on interest payments as it does on Medicare.
“The damaging effects of higher interest rates that impose higher interest costs on a massive existing debt burden continue and lead to additional borrowing,” said Michael Peterson, chief executive of the Peter G. Peterson Foundation, which promotes fiscal restraint. “It’s the definition of unsustainable.”
Senator Chuck Grassley of Iowa, the top Republican on the Senate Budget Committee, said Mr. Biden was responsible for high borrowing costs and called for cuts.
“The Biden administration has saddled generations of Americans with inflationary conditions and astronomical interest rates,” Grassley said.
The budget office said one change in the U.S. economy in recent years actually helps reduce deficits and debt over time: an increase in immigration. That’s because new immigrant workers are expected to pay nearly $1 trillion more in taxes than they will consume in government benefits.
The office said the United States is on track to add about 8.7 million more immigrants from 2021 to 2026 than historical trends would predict. They are expected to pay taxes that add $1.2 trillion in federal revenue over the course of a decade, while consuming about $300 billion in federal benefits — mostly in federal health insurance subsidies for adults and children.
The costs and benefits of immigration remain a controversial political issue in the US. The Biden administration on Tuesday announced new protections for immigrants who are in the US illegally but are married to US citizens. These measures protect them from deportation and give them the opportunity to work legally.
Jim Tankersley reporting contributed.
