Congress Budget Office Predicts US National Debt Of 144% Of GDP By Mid Century

Mohammad Ali (@ChaudhryMAli88) Published June 26, 2019 | 02:30 AM

WASHINGTON (UrduPoint News / Sputnik - 26th June, 2019) US budget deficits over the next 30 years are projected to drive the national debt to unprecedented levels - from 78 percent of gross domestic product (GDP) in 2019 to 144 percent by 2049, the Congressional Budget Office (CBO) said in the agency's Long-Term Budget Outlook.

"We present what we call our extended baseline projections - are projections of Federal spending, revenues, deficits, and debt for the next 30 years under a set of standard assumptions," CBO Director Phillip Swagel said in an accompanying statement on Tuesday.

The projection is based on an assumption that current laws generally do not change - with limited exceptions - and that Social Security and Medicare benefits for senior citizens are paid in full, even if the trust funds for each program run out of money, Swagel added.

The report noted that the estimates are highly sensitive to underlying economic factors and policy changes between now and mid-century.

For example, if non-farm business productivity were to grow one percentage point higher than CBO assumptions and everything else were same, the national debt would drop from 144 percent of GDP to 106 percent in 2049, the report said.

If interest rates were one percentage point lower than projected, debt in 2049 would equal 107 percent of GDP; if they were one percentage point higher, debt that year would equal 199 percent of GDP, according to the report.

About three-fourths of annual US budgets consist of automatic spending increases for Social Security retirement benefits, Medicare for senior citizens and interest on the debt, meaning that Congress' control is limited to about one-quarter of the money spent by the federal government each year.

The report, however, assumes that Congress will act to trim the deficit by cutting discretionary spending in 2020 and by increasing taxes in 2026. If Congress does neither, the CBO projects deficits will reach 219 percent of GDP by 2049.