Government debt is on track to hit historically high levels and at its current growth rate will be nearly equal in size to the U.S. economy by 2028, the Congressional Budget Office said Tuesday.
The debt is projected to grow to 96 percent of GDP by 2028 before eventually surpassing the historical high of 106 percent it reached in 1946.
Currently, the federal government’s debt burden is about $15 trillion, according to Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget, a nonpartisan think tank.
The 1946 high was prompted by a spending push to fund World War II, and other spikes in the debt have been driven by economic downturns. But the current bump comes amid a relatively healthy economy, suggesting a structural gap between how much the country collects in taxes and how much it spends.
The “debt-to-GDP” measurement compares the overall amount of debt held by the federal government with the size of the entire U.S. economy. Economists use the comparison, which takes into account inflation and overall economic growth, to illustrate the scope of the deficit.
The long-term deficit analysis that CBO released Tuesday goes beyond its typical assessments of budget outlooks within the next decade. The analysis makes clear the deficit projections are impossible to gauge with complete precision, in part because it cannot account for unforeseen changes to federal policy, economic trends or global events.
The CBO projects the Republican tax law passed last fall will add $1.84 trillion to the federal deficit over the next 10 years. Republican leaders have argued the cuts will jump-start the economy, creating enough economic growth to offset much of the additions to the debt. But CBO and other nonpartisan analysts have repeatedly rejected that claim.
Beyond 10 years, CBO said that its estimates are far less precise but that it does not see the tax law creating large-scale, long-term additions to the national debt. “Beyond 2028, the effects of the [tax law's] major permanent provisions are expected to be modest, although their precise magnitudes are highly uncertain,” CBO said.
In its analysis, the CBO assumes the law’s cuts to the individual income tax will expire before the end of this decade. In writing the bill, Republicans set those rates to expire as part of an effort to get their measure to comply with the procedural rules they used to pass it through the Senate.
But GOP leaders repeatedly said that the tax cuts will not be allowed to expire, promising that a future Congress will act to extend them. If the individual tax cuts are extended, the law's projected additions to the deficit would probably increase dramatically.
The Committee for a Responsible Federal Budget said Tuesday that U.S. debt would reach about 200 percent of GDP in 2048 if the tax cuts and the Congressional spending packaged agreed to last March are made permanent.
In 2017, the CBO projected that the federal debt-to-GDP ratio would reach 150 percent by 2047. But this year, despite the tax law's passage, the CBO now says federal debt-to-GDP will reach 148 percent by 2047. The slight decline is partially due to the CBO revising down its estimates for the cost of Social Security and health-care programs such as Medicaid and Medicare. The CBO also lowered its estimates for how much it expects the Children's Health Insurance Program and the Affordable Care Act to cost.
The permanent feature of the GOP tax law cuts corporate tax rates from 35 percent to 21 percent. But that change does not appear to fundamentally alter America's long-run deficit, as corporate revenue only accounts for less than 1.5 percent of GDP. Individual income taxes account for about eight percent of GDP.
The CBO still projects debt rising very quickly, with particularly fast growth in the amount America spends on its debt interest payments. Interest costs are expected to approximately double as a share of the economy over the next decade and even overtake the cost of funding Social Security — the biggest expenditure in the federal budget — by 2048.