The federal debt as a share of the U.S. economy is poised to hit a record by 2029 and will continue to rise over the next three decades, the nonpartisan Congressional Budget Office said on Wednesday in a report that laid out the nation’s long-term fiscal challenges.
In its latest 30-year outlook, the budget office warned that rising debt will pose “significant risks” to the U.S. economic outlook in the coming years, pushing up interest payments to foreign bondholders and slowing economic growth. By 2054, the cost of interest payments on the 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 rest of the nation’s outlays.
The report outlined the nation’s long-term fiscal challenges at a moment when the United States continues to borrow heavily to pay for increased federal spending along with rising interest payments on its debt. An aging population is expected to further strain the government’s coffers as more Americans become eligible for Social Security and Medicare in the coming years.
The debt as a share of gross domestic product is projected to rise to a record 107 percent in 2029 and to 166 percent in 2054.
The budget office also upgraded its growth outlook for the next three decades, largely based on growth in the size of the labor force from increased immigration.
The long-term outlook can be challenging to forecast as geopolitical events and public health crises can lead to dramatic swings in spending and output. The C.B.O. report assumes that the 2017 tax cuts that are scheduled to expire in 2025 will sunset at that time, which would result in savings to the government. However, many of those tax changes are very likely to be extended and could exacerbate the federal deficit.
The deficits projected by the C.B.O. were smaller than its forecasts from last June as a result of annual spending caps 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 that adheres to those limits.
Fiscal watchdogs continue to warn that lawmakers are overlooking a looming crisis by failing to address the national debt more aggressively.
“This is yet another reminder that politicians put political priorities ahead of the long-term health of the country,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a statement. “There is no way to look at these eye-popping numbers without realizing we need to make a change.”
Reducing deficits has proved to be challenging for lawmakers from both parties, particularly because of the resistance to restructuring social safety net programs such as Social Security and Medicare.
The White House budget last week called for tax increases on corporations and the rich that would cut the deficit by $3 trillion over the next decade. Former President Donald J. Trump had promised in 2016 to wipe out the national debt over eight years, but oversaw a widening of the budget shortfall while in office and has promised more tax cuts if re-elected.