The impartial Congressional Budget Office warned that United States debt will skyrocket to 202 percent of gross domestic product by 2051, from 102 percent this year.
US federal debt will grow to more than double the size of the economy in three decades, increasing the risk of a fiscal crisis, even though short-term dangers appear low, the Congressional Budget Office said.
The debt will equate to 202% of gross domestic product at 102% this year by 2051, the impartial arm of the legislature said in its long-term budget outlook on Thursday. The estimate of 195% in 2050 was unchanged from the previous report, whose forecasts were running that year.
Net interest payments on debt are expected to remain relatively low for the next decade and then increase rapidly over the next 20 years, the CBO said. The agency predicts that the return on 10-year Treasury bonds, after inflation, will be 2.6% in 2050. The nominal return was 1.54% on Thursday, almost the highest in more than a year.
The CBO also said the two social security funds, for seniors and people with disabilities, will run out later than the agency predicted last year.
The report – which does not reflect the $ 1.9 trillion stimulus plan currently running through Congress – follows the sell-off of treasury bonds in the past week, pushing revenues up. Investors are gaining confidence that interest rates will rise, with US growth and the labor market heading for a stronger-than-expected rebound as vaccines roll out and states lift restrictions.
The CBO’s debt projections are likely to support the Republicans’ already stiff opposition to the contingency plan, and may also concern some Democratic lawmakers as President Joe Biden prepares a multi-billion dollar follow-up plan to build infrastructure and other ways to rebuild the economy boost.
“The risk of a fiscal crisis appears to be low in the short term, despite the higher deficits and debts resulting from the pandemic,” the CBO said in the report. “Nevertheless, the much higher debt over time would increase the risk of a fiscal crisis in the coming years.”
Jerome Powell, chairman of the Federal Reserve, said on Thursday that the US economy has a long way to go before the central bank considers tightening, and underlined that the world is unlikely to change from the low inflation of recent decades.