The nation’s federal debt is projected to rise to “unprecedented levels” over the next 30 years, according to the latest projections from the Congressional Budget Office (CBO).
CBO’s new report released on Tuesday, The 2019 Long-Term Budget Outlook, said that if policymakers fail to change laws, it could push the country into the risk of a fiscal crisis.
Federal debt is expected to rise from 78% of GDP in 2019 to 92% percent in 2029 and 144% in 2049, the most ever in history, the CBO said.
“That level of debt would be the highest in the nation’s history by far, and it would be on track to increase more,” said the agency’s report.
These are projections of federal spending, revenues, deficits, and debt for the next 30 years under a set of standard assumptions.
CBO projections assume that there will be no changes to the law, and that benefits paid through federal safety programs — such as Social Security and Medicare — are paid in full even if there are insufficient resources in the trust funds associated with each program.
“The upshot is that even if productivity growth or interest rates differed in meaningful ways from our projects in the direction that would tend to reduce deficits, debt several decades from now would probably be much higher than it is today if current laws generally did not change,” said CBO in a statement.
Deficits have climbed following two major fiscal stimulus measures under the Trump administration, including a $1.5 trillion tax cut and a massive spending bill. Congress is now negotiating a new deal to replace the budget, which expires on October 1.
“Higher interest costs are a major contributor to the large deficits that we project — the result of a substantial increase in federal borrowing, along with higher interest rates over the long term,” according to the report. “We project that net outlays for interest would more than triple in relation to the size of the economy over the next three decades, exceeding all discretionary spending by 2046.”
Federal deficits are expected to rise as spending outpaces taxes collected by the federal government. The deficit as a share of GDP is projected to rise from 4.2% to 4.5% in the next decade. That’s significantly more than the 2.9% rate over the last 50 years.
“We project that net outlays for interest would more than triple in relation to the size of the economy over the next three decades, exceeding all discretionary spending by 2046.”
Debt held by the public has been rapidly rising at a significant clip since 2007. At the time, federal debt stood at 35% of GDP, but deficits arising from the 2007-2009 recession and subsequent policies caused debt to grow sizably in relation to the economy over the next five years. By the end of 2012, debt as a share of GDP had doubled, reaching 70%.
Even so, the CBO’s report points out that the nation’s debt and deficit are now expected to grow slower than previously forecasted as a result of lower interest rates and reduced disaster spending.
The national debt will hit 141% of GDP over the next 30 years, according to the agency. The new estimate is 11 percentage points lower than last year.
CBO officials warned policymakers that the nation’s debt and deficit issue still “poses substantial risks” to the U.S. economy.
On Tuesday, the “CBO confirmed our dangerous fiscal course and the vast majority of voters across party lines are urging their leaders to begin to manage our national debt,” said Michael Peterson, CEO of the Peter G. Peterson Foundation.
Peterson called the CBO’s recent report “a timely reality check” as America’s leaders consider costly new spending proposals and tax cuts.
“Our $22 trillion in debt is more than just a staggering number,” he said, “It is standing in the way of our ability to build a better future for our nation, reducing opportunity, resources, and the quality of life for our kids and grandkids.”
“The good news,” Peterson added, “is that it’s entirely within our control to build a better future for our nation.”