Federal Deficit Could Balloon to 13% by 2050, CBO Report Says

September 22, 2020 by Reece Nations
Phillip Swagel, Director, Congressional Budget Office, makes his first public appearance at the 2019 Fiscal Summit hosted by the Peter G. Peterson Foundation.(Photo courtesy the Peter G. Peterson Foundation)

WASHINGTON – The federal debt owed by the United States government is expected to grow over the next 30 years to almost twice the size of the nation’s economy, according to the Congressional Budget Office’s Long-Term Budget Outlook report.

While the average deficit over the past 50 years has been around 3% of GDP, federal deficits are forecasted to grow from 5% of GDP in 2030 to 13% by 2050, according to the report. However, revenues measured as a percentage of GDP are estimated to increase after pandemic-induced economic disruption has been quelled.

By 2020’s end, the amount of federal debt held by the public is predicted to equal 98% of the country’s gross domestic product, according to the report. While some of the debt’s growth this year can be attributed to pandemic-related public spending, deficits are expected to reach all-time highs in the coming decades.

“High and rising federal debt makes the economy more vulnerable to rising interest rates and, depending on how that debt is financed, rising inflation,” a summary of the report’s text read. “The growing debt burden also raises borrowing costs, slowing the growth of the economy and national income, and it increases the risk of a fiscal crisis or a gradual decline in the value of Treasury securities.”

Before congress passed a $3 trillion COVID-19 stimulus bill, signed into law by President Trump in March, the CBO predicted in January federal debt would reach 180% of the nation’s GDP by 2050, according to a previous report. That figure is now projected to reach 195% of the nation’s GDP by 2050.

Annually, the CBO publishes a report that gauges what federal deficits, revenues, debt and spending would be for the next 30 years if no changes to laws governing taxes and spending generally were to occur, according to the report. The office now expects debt as a percentage of GDP will be higher by 45 points in 2049 than what the agency had projected last year.

“The year began with a strong economy and labor market but also with a projected budget deficit of $1 trillion that was already high by historical standards,” CBO Director Phill Swagel said in a statement. “The pandemic changed the situation dramatically.

“Our projection of the 2020 deficit has increased to $3.3 trillion, mostly reflecting the budgetary effects of legislation enacted to address the pandemic and the resulting economic downturn,” Swagel’s statement continued. “At 16 percent [sic] of GDP, the deficit relative to the size of the economy will be the largest since 1945.” 

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