JUL 27, 2022 BUDGETS & PROJECTIONS
The Congressional Budget Office (CBO) released its Long-Term Budget Outlook today, which shows debt rising to 185 percent of GDP by 2052 under CBO’s current baseline. Also today, the Federal Reserve announced a 75-basis-point increase in interest rates and signaled further interest rate hikes in the future to help keep inflation under control.
The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
Inflation is surging, interest rates are rising, and debt is growing unsustainably. It is well past time for policymakers to work together to get our fiscal house in order.
Even under CBO’s outdated economic assumptions and current law policy assumptions, debt will hit a new record in 2031 and rise to an unprecedented 185 percent of GDP in 30 years. We’re entering uncharted territory.
Rising interest rates are fanning the flames of this already dangerous situation.
Assuming relatively low rates, interest will hit a record 3.3 percent of GDP by 2032 and more than double that record by 2052. By 2049, interest will be the single largest federal government expenditure, and in combination with health and retirement spending it will make up nearly three-quarters of the budget by 2052.
If interest rates follow CBO’s higher interest rate path, debt would reach 235 percent of GDP. And if policy followed CBO’s costly alternative scenario, debt would increase to 262 percent of GDP by 2052.
All this is a reminder to those who argued we should amp up our borrowing in years past because rates would always remain low that this was a dangerous bet with real consequences.
Today’s outlook is all the more reason we need a deficit-reducing reconciliation package focused on generating budgetary savings and controlling inflation.
We need to take action today, before debt and interest costs spiral out of control.