By Kate Davidson 

WASHINGTON -- The federal government has the capacity to borrow more if Congress chooses, despite high and rising federal debt, Congressional Budget Office Director Phillip Swagel said Monday.

The agency released new projections showing weaker economic growth and significantly higher federal debt over the next 30 years than it forecast in June 2019, the last time it released long-term economic projections and before the coronavirus pandemic swept across the U.S., triggering a deep recession.

Although the long-term fiscal challenges are daunting, Mr. Swagel said, "the U.S. is not facing an immediate fiscal crisis."

"The current low interest rates indicate that the debt is manageable for now and that fiscal policy could be used to address national priorities, if the Congress chose to do so," he said in a statement accompanying the new projections.

The projections released Monday are an extension of forecasts the CBO released over the summer, showing debt as a share of the economy is on track to hit 100% next year and reach 108.9% by the end of the next decade, the highest since World War II.

Debt as a share of gross domestic product will hit 195% by 2050, the CBO said, 45 percentage points higher than it projected in June 2019. The increase is due in large part to surging federal outlays to combat the pandemic, followed in later years by rising interest costs on the federal debt and higher spending on safety-net programs such as Social Security and Medicare.

The agency also expects slower growth over the coming decades as the U.S. crawls out of the downturn brought on by the pandemic, which triggered business shutdowns that led to millions of layoffs. The CBO now sees average annual GDP growth of 1.6% from 2020 to 2050, roughly a quarter percentage-point less than it expected last year, and more than a full percentage point lower than the 2.5% average from 1990 to 2019.

The nation's widening budget gap is at the center of a debate over how much more spending is needed to support a recovery from the pandemic, which sent the U.S. into a recession in February. Democrats have called for another sweeping aid package, which they say is essential to help the U.S. avoid a prolonged, lackluster recovery similar to the years following the 2007-09 recession. Republicans say policy makers need to keep rising debt in check and called for a narrower bill with targeted aid.

Write to Kate Davidson at kate.davidson@wsj.com

(END) Dow Jones Newswires

September 21, 2020 14:37 ET (18:37 GMT)

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