The national debt will increase to about twice the size of the economy over the next 30 years, the Congressional Budget Office said Monday in its latest long-term budget outlook.
Currently equal to about 98%, the debt-to-GDP ratio is projected to increase to 195% by 2050, reaching levels never seen in the nation’s history.
The CBO said that the coronavirus recession has changed the outlook significantly: “CBO now projects that debt as a percentage of GDP will be 45 percentage points higher in 2049 than the agency projected last year. Larger projected deficits in 2020 and 2021 contribute significantly to that difference. The increase in those deficits results primarily from the effects of the pandemic and actions taken to respond to it.”
The CBO also warned about the risks involved with rising debt. “High and rising federal debt makes the economy more vulnerable to rising interest rates and, depending on how that debt is financed, rising inflation,” CBO said. “The growing debt burden also raises borrowing costs, slowing the growth of the economy and national income, and it increases the risk of a fiscal crisis or a gradual decline in the value of Treasury securities.”
Still, CBO Director Phillip Swagel said in a statement that a crisis is not immediately at hand. “There is no set tipping point at which a fiscal crisis becomes likely or imminent, nor is there an identifiable point at which interest costs as a percentage of GDP become unsustainable,” Swagel said. “But as the debt grows, the risks become greater.”