U.S. National Debt Likely to Nearly Double to 202% of GDP by 2051
By John McCormick
The federal debt is projected to almost double to 202% of gross
domestic product by 2051, the Congressional Budget Office said
Thursday, reflecting rising costs for healthcare and debt
The U.S. economy is projected to grow 1.8% a year during the
next three decades, up from the 1.6% forecast the nonpartisan
agency made in September, as the CBO now expects a smaller impact
from the coronavirus pandemic. That is up from the 1.6% forecast
the nonpartisan agency made in September. Growth averaged 3.1% a
year from 1951 through 2020, the CBO said.
The federal debt is projected to be 102% of the gross domestic
product in 2021. It has exceeded that level only twice before in
U.S. history, in 1945 and 1946, following a surge in federal
spending as a result of World War II.
The forecasts don't take into account the $1.9 trillion in
federal spending proposed by President Biden and backed by
Democrats, who narrowly control the House and Senate. Democrats say
the measure is needed to ease pain from the business closures and
job losses caused by the pandemic and related restrictions on
Congressional Republicans, meanwhile, object to the size of the
stimulus package and have pointed to growing budget deficits and
debt as a reason to keep spending in check as they argue the
economy is already poised for stronger growth.
Budget deficits will widen to 13.3% of GDP in 2051, from 5.7% in
2031, driven largely by increasing costs of servicing the debt, the
CBO said. Net spending on interest will triple relative to GDP in
the two decades leading up to 2051, and spending on programs such
as Social Security and Medicare will also rise.
Weak federal revenue is also expected to contribute to a
widening budget gap, the CBO said. After declining to 16% percent
in 2021 from 16.3% in 2020, total revenues as a share of GDP are
projected to reach 17% in 2025.
The projections offered Thursday are an extension of forecasts
CBO released last month for the next decade, which showed federal
debt is expected to rise to a record 107% of economic output by
2031, from 100% of GDP in the last fiscal year ended Sept. 30.
While federal budget deficits were high and rising before last
year, they have grown significantly as a result of the economic
disruption caused by the coronavirus pandemic and the trillions of
dollars of economic relief passed during former President Donald
The CBO cautioned that its long-term budget forecasts are
subject to greater uncertainty than usual because of the pandemic
and could be altered by unexpected changes in demographics,
healthcare or the economy.
Net interest costs as a share of GDP will average 1.6% over the
next decade, the CBO said, well below the 50-year average. But then
they are projected to rise over the following two decades, reaching
8.6% by 2051.
Administration officials, including Treasury Secretary Janet
Yellen, have argued that projected low debt costs make it more
affordable for Congress to borrow more now to support the U.S.
economy's recovery. They say that borrowing more now could propel a
faster recovery, which could improve the country's fiscal
Some money managers, meanwhile, have grown concerned that
stimulus measures will lead to a spike in inflation and erode the
value of bond returns. The yield on the benchmark 10-year Treasury
note, which influences borrowing costs across the economy, has
already risen to levels not seen since the start of the
The CBO projected that yields on 10-year Treasurys will average
1.6% from 2021 to 2025 and 3% from 2026 to 2031, before rising
steadily to 4.9% by 2051.
Write to John McCormick at email@example.com
(END) Dow Jones Newswires
March 04, 2021 15:54 ET (20:54 GMT)
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