The nonpartisan Congressional Budget Office (CBO) released its latest 10-year budget and economic outlook Friday that showed the federal government is on track to break a debt record set nearly 80 years ago.
The CBO’s outlook shows that, as a percentage of gross domestic product (GDP), or compared to the size of the U.S. economy, the federal debt held by the public is on pace to rise from 98% of GDP at the end of fiscal year 2024 to 107% of GDP in fiscal 2029.
At that point, the debt held by the public would not only exceed the size of the U.S. economy, it would also surpass the current debt record of 106% of GDP set in 1946, when the U.S. began the process of demobilizing after the conclusion of World War II. It’s projected to continue to grow going forward, reaching 118% of GDP in 2035.
“From 2025 to 2035, debt rises as increases in spending on Social Security, Medicare and interest payments outpace growth in revenues,” CBO Director Phillip Swagel told reporters.
THE FEDERAL DEFICIT KEEPS GROWING, AND THE CONGRESSIONAL BUDGET OFFICE HAS SOLUTIONS
The federal government is projected to run a $1.9 trillion budget deficit in the 2025 fiscal year. The deficit is projected to briefly decline in the next two years before resuming its rise in projections to more than $2 trillion in fiscal 2030 and reaching $2.7 trillion in fiscal 2034.
The temporary decline in the size of the deficit is partly due to the projected expiration of portions of the 2017 tax cuts at the end of this year under current law causing tax revenue to rise. Though Congress and the incoming Trump administration may enact new legislation extending those provisions.
The CBO’s analysis is based on current law, so changes to federal tax and spending policies could alter those figures.
WHAT WERE THE BIGGEST BUDGET DEFICITS IN US HISTORY?
Much of the growth in the deficit is due to increased spending on entitlement programs like Social Security and Medicare as America’s population continues to age and the increased cost of servicing a larger national debt during a time of elevated interest rates.
Spending on Social Security is projected to rise from $1.5 trillion in fiscal 2025 to $2.6 trillion in fiscal 2035, while Medicare spending is expected to grow from $942 billion to $1.7 trillion in that period. The cost of paying interest on the national debt increases from a projected $952 billion this fiscal year to more than $1.7 trillion a decade from now.
Swagel also noted that Social Security’s Old Age and Survivors Insurance Trust Fund is projected to be exhausted in 2033, the same year as the CBO’s most recent analysis from last June projected.
When that trust fund is depleted, Social Security beneficiaries will, by law, see their benefits automatically cut to match payroll tax revenue, which an analysis by the nonpartisan Committee for a Responsible Federal Budget (CRFB) found would result in a 21% cut to Social Security benefits.
US NATIONAL DEBT HITS A NEW RECORD: $36 TRILLION
“A fiscally weak country cannot remain a strong country for long,” CRFB President Maya MacGuineas said in a statement. “The United States has built a dangerous mountain of debt quite simply because our political leaders are unwilling to do the hard work of governing responsibly and acting as fiscal stewards for the country.
“They choose to borrow at record levels rather than acknowledging that part of budgeting is having a plan to pay the bills and despite the incredible damage they continue to inflict on the country as the debt grows,” she added. “As today’s report shows, our debt is at near-record levels only seen just after World War II, we will spend more on interest than any program other than Social Security and Social Security will become insolvent in less than a decade.”
Michael Peterson, CEO of the nonpartisan Peter G. Peterson Foundation, said, “By any definition, we are on an unsustainable fiscal path. We are currently on track to add $22 trillion to our national debt over the next ten years, including $14 trillion spent in interest costs alone. In ten years, our debt will grow to reach a staggering 118% of our entire economy.
“Today’s report shows a daunting outlook, but the good news is that there are many policy solutions available to address our fiscal challenges,” Peterson added. “As we approach Inauguration Day, our leaders have a new opportunity to secure America’s economic future by putting us on a stronger, more sustainable fiscal trajectory.”
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