Despite the dramatic showdown over the debt ceiling and the resulting budget agreement that restrains federal spending through 2025, the national debt is projected to rise to record levels over the next 30 years, the Congressional Budget Office said Wednesday.
In its updated long-term budget outlook, CBO said that while the nation’s fiscal trajectory was modestly improved by the recently enacted Fiscal Responsibility Act, debt held by the public will rise sharply nevertheless, climbing to 181% of gross domestic product by 2053 – about three times the average level of debt-to-GDP recorded over the last three decades.
Rising outlays for health care and retirement security play a central role in the debt dynamics. Spending on major health care programs including Medicare and Medicaid will rise from 5.8% of GDP to an estimated 8.6% of GDP by 2053, while Social Security outlays will rise from 5.1% of GDP to 6.2% of GDP. Interest costs on the debt will rise, as well, increasing from 2.5% of GDP now to an estimated 6.7% of GDP in 30 years. Revenues, meanwhile, will remain basically flat.
Saying the outlook is “challenging,” CBO warned lawmakers about potential negative effects. “Such high and rising debt would have significant economic and financial consequences,” the report says. “It would, among other things, slow economic growth, drive up interest payments to foreign holders of U.S. debt, elevate the risk of a fiscal crisis, increase the likelihood of other adverse effects that could occur more gradually, and make the nation’s fiscal position more vulnerable to an increase in interest rates. In addition, it could cause lawmakers to feel more constrained in their policy choices.”
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonprofit group that advocates for deficit reduction, called on lawmakers to address the growing fiscal imbalance. “Today’s long-term projections show that we have made some recent progress, but there is still a tremendous amount of work needed to put our fiscal situation on sound footing,” she said in a statement. “Even under the latest projections, debt will eclipse its record level in just six years and reach nearly double the size of the economy in 30 years. This level of debt would be truly unprecedented ...”