The US will rack up budget deficits totalling $13.1tn over the coming decade and continuing to rise to levels “unprecedented in US history”, according to projections from the non-partisan Congressional Budget Office.
In its twice-yearly report on the budget and economic outlook, released on Tuesday, the CBO predicted a budget shortfall of $1tn in 2020, or 4.6 per cent of gross domestic product, and set out a deteriorating longer-term picture based on recent changes to the tax code and the ageing US population.
“Not since World War II has the country seen deficits during times of low unemployment that are as large as those we project, nor, in the past century, has it experienced large deficits for as long as we project,” CBO director Philip Swagel said in a statement.
Last year, the CBO predicted that US debt would rise to 144 per cent of GDP by 2050. Its updated projections now show total US debt will have risen to 98 per cent of GDP by 2030, and 174 per cent by 2050. In 2019 it was 79 per cent.
This difference reflects changes to the tax code made at the end of last year. Congress repealed a corporate tax on high-cost healthcare plans and lifted self-imposed caps on some kinds of spending.
The CBO is more confident that the economy will continue to grow over the next year, projecting 2.2 per cent GDP growth in 2020, up from its last projection in August of 2.1 per cent. Its long-term growth estimates remain the same, at 1.8 per cent until 2030.
The long-term outlook also reflects a change in the CBO’s assumptions about interest rates. As the costs of borrowing continue to drop globally, the office now projects the US Treasury will be paying 3 per cent interest on 10-year debt in 2029, down from 3.2 per cent predicted in August.