In a new report released on Wednesday, the Congressional Budget Office (CBO) has reported that over the next three decades, the US national debt will nearly double, and interest payments on the debt will triple compared to the Gross Domestic Product (GDP).
The non-partisan group of budget experts from Congress warned that if the current laws remain unchanged, the US national debt will soar from the current estimate of 98% of GDP, to 107% by 2029, to 181% by 2053.
The CBO wrote, “Such high and rising debt would slow economic growth, push up interest payments to foreign holders of US debt, and pose significant risks to the fiscal and economic outlook.”
Public debt represents how much the Treasury has borrowed from both foreign and domestic investors to pay the government’s obligations, from basic obligations such as healthcare and social security to more complex government activities. The public debt was equal to 78% of the gross federal debt as of December of 2022.
Total US debt is now more than $32 trillion following a lifting of the debt ceiling earlier this month, which was required to avoid the United States being forced into a default.
As the US is being confronted with this, The US Federal Reserve has been hiking interest rates over the previous year, in an attempt to rein in the worst inflation the nation has seen since the 1980’s. Currently the Fed funds rate is at 5% to 5.25%, up from 0% in early 2022
Over the first quarter of the year, US government interest payments increased to 3.5% of GDP, an increase from the 2.4% it came in at over the same period in 2022. Earlier this month market strategist Charlie Bilello, noted that this was the largest annual increase on record.
According to the report from the CBO, it is also predicted that the deficit between spending and revenues will increase over the coming decades, hitting 10% of GDP by 2053.
The budget group noted that primary deficits will combine with rising interest rates to cause interest costs on the US debt to almost triple compared to GDP over the next three decades.
