The Congressional Budget Office issued a warning this month that the United States’ national debt is on an unsustainable long-term trajectory.
Under the CBO’s extended scenario in the Long-Term Budget Outlook, federal debt held by the public is projected to surge from 97% of Gross Domestic Product at the end of Fiscal Year 2022 to 181% by the year 2053 if current laws remain unchanged.
The “Alternative Scenario,” which incorporates assumptions of some expiring provisions being extended, faster discretionary spending growth, and weak revenue collections, predicts an even worse outcome, with debt reaching 222% of Gross Domestic Product by the end of 2053.
The report further highlights the explosive growth of budget deficits. If no changes are made to existing policies, the budget deficit is projected to grow from 5.8% of GDP in 2023 to 10% by 2053.
This deficit in 2053 would be the highest outside of World War II and the Covid-19 pandemic, nearly three times the 50-year historical average of 3.6 percent of GDP.
The CBO’s Alternative Scenario presents an even graver outlook, with the deficit potentially reaching 12.6% of GDP by 2053.
The government projections show that government spending will consistently outpace revenue.
According to the extended baseline, spending will decline to 23.1% of GDP by 2026 but will subsequently rise to 29.1 percent by 2053.
In contrast, revenue is expected to decrease to 17.4% of GDP by 2025 before edging back to 19.1% by 2053. The primary drivers of this spending growth are increased retirement, healthcare, and net interest costs.
The CBO estimates that by 2052, debt will total 177% of GDP, 8 percentage points lower than the previous estimate of 185% of GDP. The projected deficit for 2052 is expected to be 9.8% of GDP, down from 11.1% in the previous long-term outlook. These improvements are primarily attributed to the $1.5 trillion of 10-year savings outlined in the Fiscal Responsibility Act.
High levels of debt impede income and wage growth, increase interest payments on the national debt, reduce fiscal flexibility during recessions or emergencies, burden future generations, and heighten the risk of a fiscal crisis.
If left unaddressed, the government projections suggest that the national debt will grow rapidly, reaching unprecedented levels relative to the size of the economy. With a nominal increase of approximately $120 trillion, the debt held by the public is forecasted to surge from $25 trillion to nearly $144 trillion by 2053.