The nonpartisan budget office of Congress has warned that by 2051, US debt will increase to 202 percent of gross domestic product, up from 102 percent this year.
The US federal debt will grow to more than double the size of the economy in three decades, increasing the risk of a fiscal crisis, even if the dangers appear low in the near future, the Congressional Budget Office said.
The debt will be equivalent to 202% of gross domestic product by 2051 from 102% this year, the non-partisan arm of the legislature said on Thursday in its long-term budgetary outlook. Its projection for 195% in 2050 was unchanged from the previous report, whose forecasts lasted that year.
Net interest payments on debt are expected to remain relatively low for the next decade, then to rise rapidly over the next 20 years, the OCP said. The agency predicts the 10-year Treasury yield after inflation at 2.6% in 2050. The nominal yield was 1.54%, almost the highest in more than a year on Thursday.
OBC also said that the two social security trust funds, intended for the elderly and people with disabilities, will be exhausted later than the agency projected last year.
The report – which does not reflect the $ 1.9 trillion stimulus plan currently underway in Congress – tracks last week’s Treasury sales that led to higher yields. Investors are gaining more confidence that rates will rise, with US growth and the labor market set to grow faster than expected as vaccines are launched and states lift restrictions.
CBO’s outlook for debt is likely to support Republicans’ already strong opposition to the aid plan, and could also concern some Democratic lawmakers, while President Joe Biden is preparing a multi-billion dollar follow-up plan to build infrastructure. and stimulate the economy in other ways.
“The risk of a fiscal crisis appears to be low in the short term, despite higher pandemic deficits and debt,” the CB said in the report. “However, much higher debt over time would increase the risk of a fiscal crisis in the coming years.”
Federal Reserve Chairman Jerome Powell said on Thursday that the US economy still has a long way to go before the central bank considers tightening and stressed that the world of low inflation in recent decades is unlikely to change.