Large, growing debt would slow economic growth in US: CBO

By 2029, that debt will climb to 107 per cent of GDP, exceeding the historical peak it reached immediately after World War II, CBO said in its ‘The Long-Term Budget Outlook: 2025 to 2055’.

In 2055, it will reach 156 per cent of GDP and remains on track to increase thereafter.

Such large and growing 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. It could also cause lawmakers to feel constrained in their policy choices, the report said.

The total federal budget deficit will remain large by historical standards over the next 30 years, averaging 6.3 per cent of GDP—more than one and a half times its average over the past 50 years—and reaching 7.3 per cent of GDP in 2055, CBO projects.

Those amounts are the result of rising interest costs and sustained primary deficits, which exclude net outlays for interest. Primary deficits average 2 per cent of GDP over the 30-year period; over the past 50 years, they averaged 1.7 per cent of GDP.

Federal outlays will rise over the next 30 years, reaching 26.6 per cent of GDP in 2055. They have exceeded that level only twice: during World War II and during the coronavirus pandemic.

Measured as a percentage of GDP, revenues increase over the next few years, largely because of the scheduled expiration of certain provisions of the 2017 tax act.

Revenues will generally continue to rise thereafter, reaching 19.3 per cent of GDP in 2055, mainly because growth in real income (that is, income adjusted to remove the effects of changes in prices) boosts receipts from individual income taxes.

ALCHEMPro News Desk (DS)