‘Nothing short of self-sabotage’: Watchdog warns about national debt setting new record in just 4 years
The United States is on a collision course with its own history, and about to break fiscal records in the worst possible way. With current policies and spending, the country’s national debt will surge to 120% of GDP by 2030, eclipsing the previous record of 106% set right after World War II. Fiscal watchdogs are warning that such high levels of debt effectively amount to a self-inflicted wound, as the U.S. abdicates its responsibility to its citizens, sustainable economic growth, and national security.
The U.S. is currently sitting on a federal budget deficit of $1.9 trillion and a national debt worth 101% of GDP, according to an economic outlook report released Wednesday by the Congressional Budget Office (CBO). In 10 years, that number will rise to 120%, but it will take just four years to beat the current high-water mark set in 1946, after years of massive deficit spending to finance U.S. efforts during World War II.
The projections have drawn blistering reactions from nonpartisan watchdogs, perhaps none more so than Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
“There are no surprises here or bright spots of encouraging news: Our nation’s deficits, debt, interest payments, and trust funds are all in terrible shape,” MacGuineas said in a statement. “At this moment in time with challenges ranging from the aging of society to growing geopolitical rivalries, it is nothing short of self-sabotage to operate with such a self-imposed disadvantage.”
MacGuineas’s argument is centered on a concern often voiced by budget hawks: With debt already severely surpassing GDP, the government’s ability to navigate economic downturns or unexpected crises becomes increasingly constrained. The higher debt is, the smaller a government’s fiscal space, the wiggle room a country has to adjust its budgetary priorities, tweaking spending or tax receipts without jeopardizing economic stability. Healthy fiscal space is important for both long-term development as well as a government’s capacity to respond to an unforeseen event, such as a pandemic.
But as the CBO report warned, the fiscal space available to the U.S. is quickly becoming airtight. Most concerning is the cumulative interest the U.S. will have to pay to service its own debt: over $2 trillion a year by 2036, or around 5% of GDP. That’s around double what the U.S. is paying in interest right now. All told, shrinking fiscal space and rising interest could severely limit the U.S. government’s ability to maintain economic stability, analysts warn.
“CBO’s baseline—as bad as it is—assumes interest rates will remain moderate and that we will face no costly unforeseen events. If those rosy projections do not transpire, the damage will only be worse,” Michael Peterson, CEO of the Peter G. Peterson Foundation, a fiscal research nonprofit, told Fortune.
Phillip Swagel, the CBO’s director, echoed this urgency in his own statement, directly declaring that the agency’s projections “continue to indicate that the fiscal trajectory is not sustainable,” and that the government’s growing bill also risks undermining business spending and growth elsewhere in the economy.
“When the federal government borrows in financial markets, it competes with other participants for funds, and that competition can push up interest rates and crowd out private investment,” he said.
In her statement, MacGuineas also noted how a heavy debt load is already threatening some of the nation’s core safety nets with insolvency. The Highway Trust Fund, a mechanism to finance transit infrastructure maintenance, is projected to be exhausted by 2028, and the Social Security Old-Age and Survivors Insurance Trust Fund, a retirement funding program, is now expected to run out in 2032—one year earlier than previously estimated.
While the U.S. national debt has been rising for decades, reducing it has become a bipartisan talking point. Trump himself has repeatedly pledged to scale back debt and spending, although the CBO report estimated that his first year back in office added $1.4 trillion to its 10-year estimate.
If current laws remain unchanged, the CBO projects that federal debt will climb to a massive 175% by 2056. MacGuineas concluded that the lack of fiscal leadership is a direct threat to the country, urging lawmakers to get serious: “I encourage every member of Congress and the president to take a cold hard look at these numbers and pledge to fix our nation’s finances before it is too late.”
This story was originally featured on Fortune.com