The federal debt is on track to double over the next 30 years, Congress’s official budget office estimated Tuesday, presenting what it deemed were “substantial risks” for the government.
“The prospect of large and growing debt poses substantial risks for the nation and presents policymakers with significant challenges,” the Congressional Budget Office said in a long-term budget report, the kind of warning it has made repeatedly in recent years.
The nonpartisan office said that with current laws in place the debt held by the public is likely to rise from 78 percent of gross domestic product today to 152 percent by 2048.
Those projections are not much changed from the year before. While Trump’s tax cuts and spending increases make the budget picture worse in the short run, that hit to the government’s coffers is offset by lower interest cost projections over the long term.
Nevertheless, the level of debt estimated in the report would be “the highest in the nation’s history by far,” eclipsing even the run-up in debt incurred to pay for World War II.
Typically, such budget projections are uncertain even just a decade into the future because of the difficulty of planning for economic booms and busts, wars, and other big changes to the government’s finances.
Nevertheless, the report highlights the unfavorable long-term trends facing the government.
The most basic problem is that spending is growing faster than revenues. The CBO sees government spending steadily rising from 20.6 percent of the economy today to 27.9 percent by 2048.
Meanwhile, revenue growth will not keep pace. Taxes will actually rise, especially if the individual portions of the Trump tax cuts expire as scheduled in 2025 — not a guaranteed prospect by any means, as Republicans have called for making them permanent. But revenues will top out at around 20 percent of GDP, not enough to cover spending.
The end result is mounting debt. One reason that’s a problem is because the bill for interest payments on the debt will make it harder for Uncle Sam to pay for defense and other programs. Within the next 30 years, the government’s interest costs are set to eclipse Social Security spending. Interest payments will also exceed all of what Congress spends on defense and all non-entitlement government programs.
Spending is rising in large part because of the aging of the Baby Boom generation, who are moving further into retirement. The federal government is set to spend increasing amounts on Social Security and Medicare benefits as a result. Healthcare costs, too, are projected to rise.
If Congress wanted to stabilize or reduce the debt, major changes would be needed. Merely to keep the debt from rising, the government would have to raise taxes or cut spending by 1.9 percent of GDP starting this year and continuing every year for the foreseeable future, according to the CBO. That’s about $400 billion.
To lower the debt to its historical average by 2048, Congress would have to implement $630 billion in deficit reduction starting next year and continuing into the future. If Congress started later, deeper cuts or bigger tax hikes would be needed.
