Washington, D.C.– New Congressional Budget Office projections show a dire long-term outlook for the nation’s finances, with U.S. debt expected to rapidly grow over the next 30 years, caused in large part by increased spending on major health care programs and Social Security, insufficient revenues to fund them, and higher interest payments on the federal debt.
The size of the federal government’s debt is accelerating towards uncharted territory. The current level of debt held by the public, 78 percent of GDP, is the highest since near the end of World War II. By 2034, CBO projects debt held by the public will exceed 106 percent of GDP, the highest on record in U.S. history.
“Inaction to improve the country’s finances will lead to the federal government setting the unwanted record of the highest level of debt in U.S. history,” Shai Akabas, director of economic policy at BPC, said. “The massive deficits caused by policymakers’ recent tax and budget decisions have drastically worsened the country’s long-term finances.”
Here are the key takeaways from CBO’s new report:
- By 2048, debt held by the public is projected to reach 152 percent of GDP.
- Total federal spending is projected to grow throughout the entire 30-year window, from 20.6 percent of GDP in 2018 to 29.3 percent of GDP in 2048.
- Net interest payments on the federal debt are projected to more than triple to 6.3 percent of GDP by the end of the 30-year window.
- Spending on major health care programs is projected to nearly double as a percentage of GDP, from 5.2 percent in 2018 to 9.2 percent in 2048.
- Social Security costs are projected to grow from 4.9 percent of GDP in 2018 to 6.3 percent in 2048.
- Discretionary spending (i.e., investments in education, infrastructure, research etc., along with defense spending) is projected to decline from 6.3 percent of GDP in 2018 to 5.5 percent in 2048.
- Growing deficits also drive up interest spending, which grows to consume 21.5 percent of federal spending at the end of CBO’s projection, compared to 7.8 percent today.
- Revenues are projected to grow from 16.6 percent of GDP to 19.5 percent in 2048. However, CBO’s projection includes the expiration of a number of provisions in the Tax Cuts and Jobs Act of 2017. Should those provisions be extended, revenues would be significantly lower.
“We knew already that federal debt was heading towards unsustainable levels,” Akabas said, “but the new projections give us a picture of just how bad the problem will be in 30 years, when our children and grandchildren will have to foot the bill.”
Shai Akabas is available for comment