US Congressional Budget Office: "US Government Debt to Reach Twice GDP by 2050"

U.S. Federal Government Debt Expected to Reach 98% of GDP This Year... 195% by 2050
"Currently Low Interest Rates, but Future Financing Costs Will Be a Key Issue"

United States Capitol [Photo by EPA Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The Congressional Budget Office (CBO) of the United States has projected that the U.S. government debt will reach nearly twice the size of the Gross Domestic Product (GDP) in 30 years. This outlook comes amid an expanded debt level due to aggressive fiscal policies implemented in response to the COVID-19 pandemic, with expectations that rising interest rates will increase the burden going forward.

According to Bloomberg News and others on the 21st (local time), the CBO forecasted in its long-term budget outlook report that the federal government debt will reach 195% of GDP by 2050. This ratio, which was 79% last year, is expected to rise to 98% this year and double in 30 years.

Before the COVID-19 outbreak, the CBO’s projections in June last year and January this year were 150% and 180%, respectively. Since then, a massive $3 trillion stimulus package passed through Congress and was injected into the market, increasing the debt needed to finance these funds. The CBO expects the U.S. debt level to eventually resemble the current debt scale of Japan or Greece in the long term.

The fiscal deficit relative to GDP is expected to be 16% this year, the highest since World War II in 1945. The CBO estimates that this ratio will gradually decline over several years but will rise again from 2028, reaching 12.6% in 2050. The CBO noted that the current ultra-low interest rate environment will change starting in 2030, and with rising interest rates, the debt burden will increase, further deepening the fiscal deficit.

The CBO projected the U.S. average annual economic growth rate to be 1.6% through 2050, which is 0.3 percentage points lower than the forecast made in June last year. Philip Swagel, director of the CBO, said, "Currently, we are in a low-interest-rate environment and fiscal policy has more urgent issues, but eventually, financing costs will become a key topic."

In U.S. politics, the increase in government debt is already a contentious issue. The Democratic Party advocates for large-scale support measures such as expanded unemployment benefits in response to the COVID-19 impact, while the Republican Party argues for targeted support citing the rising debt trend as a reason.