US national debt to be double GDP by 2051, raising risk of fiscal crisis: CBO
Rising debt could spell trouble for US economy, CBO says
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The U.S. federal debt is projected to nearly double the size of the economy by 2051, slowing economic growth and raising the risk of a fiscal crisis, the Congressional Budget Office said Wednesday.
Debt could rise to 185% of gross domestic product within the next three decades, up from 98% this year, the nonpartisan agency said in its latest long-term budget outlook. Its projection is down slightly from the prior estimate, when the CBO said debt could be 202% of GDP in 2051.
Rising debt could spell trouble for the U.S. economy, the CBO warned, because higher debt tends to lead to higher interest rates and therefore more expensive borrowing costs for both the public and private sectors.
Those increased borrowing costs ultimately reduce investment, which slows economic growth.
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Night falls at the Capitol in Washington Dec. 2, 2021. (AP Photo/J. Scott Applewhite / AP Newsroom)
"Debt that is high and rising as a percentage of GDP could slow economic growth, push up interest payments to foreign holders of U.S. debt, heighten the risk of a fiscal crisis, elevate the likelihood of less abrupt adverse effects, make the U.S. fiscal position more vulnerable to an increase in interest rates and cause lawmakers to feel more constrained in their policy choices," the report said.
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Despite larger deficits and higher debt stemming from massive spending during the COVID-19 pandemic, the odds of a fiscal crisis in the near term are relatively low, the report said.
"Concern about a fiscal crisis in the near term is not currently apparent in financial markets," the report said. "However, financial markets do not always fully reflect risks on the horizon, and the risk of a fiscal crisis could change suddenly in the wake of unexpected events."
President Biden addresses the 76th Session of the U.N. General Assembly Sept. 21, 2021, at U.N. headquarters in New York City. (Timothy A. Clary-Pool/Getty Images / Getty Images)
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Budget deficits are also expected to widen to 10% of GDP in 2051, from 7.4% in 2042 and 5.1% in 2032, largely because of the growing costs of servicing the debt, the CBO said. Spending on Medicare, the health care program for older Americans, is also expected to rise as a percentage of GDP in 2051.