The Congressional Budget Office has released new estimates indicating that the federal debt will increase drastically year by year until it reaches nearly double its current level by 2049.
What did the report say?
The Congressional Budget Office (CBO) is a nonpartisan agency that comes up with cost estimates for Congress.
The report, which was published on Tuesday, said that “[l]arge budget deficits over the next 30 years are projected to drive federal debt held by the public to unprecedented levels—from 78 percent of gross domestic product (GDP) in 2019 to 144 percent by 2049.” The current level is the “highest level since shortly after World War II.” If it does reach 144 percent, it would be “the highest in the nation’s history by far, and it would be on track to increase even more.”
The CBO said that their estimates could vary based on a variety of factors including changing interest rates, and changes in discretionary spending or income tax rates. However, it said that “even if values for those factors differed from the agency’s projections, debt several decades from now would probably be much higher than it is today.”
The CBO warned that if the debt levels follow their predictions, it would “dampen economic output over time.” Additionally, the “[r]ising interest costs associated with that debt would increase interest payments to foreign debt holders and thus reduce the income of U.S. households by increasing amounts” and “[i]ncrease the risk of a fiscal crisis.”
Although tax cuts have led to an increase in revenue, the Trump administration has also increased federal government spending far beyond the increase in revenue. Because of this, the federal budget deficit hit $738.6 billion in the first eight months of 2019. The White House expects it to reach $1.09 trillion by the end of the year.