The Congressional Budget Office (CBO) is now predicting that federal debt held by the public will reach 107% of gross domestic product (GDP) by 2029.
Key Details
- Estimates from CBO anticipate that federally held debt will reach new records in just a few short years. By 2053, it will reach 181% of the GDP.
- These new numbers would surpass any other recorded levels of federally held debt.
- While these projections depend on no significant law changes in the next 30 years, CBO estimates that publicly held debt will make up 98% of the GDP by the end of 2023, Forbes reports.
- The CBO warned that if this level of debt does occur, economic growth will slow, interest payments on foreign debt will increase, and the economic outlook will worsen.
Why it’s news
The current debt projections are already grim, but the Congressional Budget Office thinks it could worsen. The prediction for 2053 conditions is expected to rise due to growing interest rates, declining trust in the U.S. dollar, and worsening inflation.
Last year, CBO predicted the U.S. would reach 185% debt in relation to GDP by 2052. As spending increases and tax revenues remain low, CBO expects the deficit to continue growing. These factors will be made worse by an aging population, increasing strain on Social Security and healthcare, Forbes reports.
However, the Budget Office added that predicting budgetary outcomes is difficult over long time periods because so many factors can change during those years. Even if laws stayed as they are now, the office warned that its projections “would be subject to considerable uncertainty.”
Other predictions from CBO suggest that deficits will average 7.3% of GDP in the next 30 years—that is over double the average in the last 50 years. By 2053, the office expects deficits to account for 10% of GDP. Numbers at that level were only seen during World War II and the COVID pandemic.
Backing up a bit
The last record debt-to-GDP ratio occurred just after World War II. Debt levels reached 106% of GDP in 1946. Numbers neared similar levels during the pandemic when the ratio was around 100% debt to GDP. Federal spending to provide COVID-related aid contributed heavily to this increase, Forbes reports.
