The non-partisan Congressional Budget Office warned that in 2051, the United States’ debt will skyrocket to 202% of its gross domestic product, up from 102% this year.
The US federal debt will grow to more than twice the size of the economy in three decades, increasing the risk of a fiscal crisis, although the dangers appear low in the short term, the Congressional Budget Office said.
The debt will be equivalent to 202% of gross domestic product in 2051, compared to 102% this year, the non-partisan branch of the legislature said on Thursday in its long-term budget outlook. Its projection for 195% in 2050 was unchanged in relation to the previous report, whose projections extended until that year.
Net interest payments on debt are expected to remain relatively low over the next decade and to increase rapidly over the next 20 years, said the CBO. The agency projects a 10-year Treasury yield after inflation at 2.6% in 2050. Nominal yield was 1.54%, close to the highest in more than a year on Thursday.
The CBO also said that the two Social Security trust funds, for the elderly and the disabled, will run out later than the agency projected last year.
The report – which does not reflect the $ 1.9 trillion stimulus plan currently pending in Congress – follows the liquidation of Treasury bills last week, which spiked yield spikes. Investors are gaining more confidence that rates will rise, with US growth and the labor market set for a stronger than expected increase, as vaccines are launched and states lift restrictions.
CBO’s debt projections are likely to support Republicans’ already staunch opposition to the relief plan, and may also worry some Democratic lawmakers as President Joe Biden prepares a multi-trillion-dollar plan to build infrastructure and boost the economy in other ways.
“The risk of a fiscal crisis appears to be low in the short term, despite the higher deficits and debt resulting from the pandemic,” said the CBO in the report. “However, much greater indebtedness over time would increase the risk of a fiscal crisis in the years to come.”
Federal Reserve Chairman Jerome Powell said on Thursday that the U.S. economy still has a long way to go before the central bank considers the tightening, and stressed that the low-inflation world of the past few decades is unlikely to change. .