America’s growing budget deficit will increase debt to the highest level in U.S. history by far, according to the Congressional Budget Office 2018 long-term budget outlook.
If current laws remain the same, U.S. debt is on track to exceed the size of the economy by 2031. By 2048, federal debt will double to 152 percent of the economy. “The prospect of large and growing debt poses substantial risks for the nation and presents policymakers with significant challenges,” wrote CBO director Keith Hall in a statement.
As the American population ages, Social Security and Medicare spending will increase significantly, explained the report. Interest payments on outstanding debt will also become a large source of spending.
“By 2048, as interest rates rise from their currently low levels and as debt accumulates, the federal government’s net interest costs are projected to more than double as a percentage of GDP and to reach record levels,” wrote Hall. “Those costs would equal spending for Social Security, currently the largest federal program, by 2048.”
The news comes on the heels of President Donald Trump’s $1.5 trillion tax cut and $1.3 trillion omnibus spending bill.
Republican tax cuts contribute to the deficit level by limiting revenue collection, but are set to expire in 2026. The GOP, however, is currently drafting legislation to make individual tax cuts permanent. “If lawmakers changed current law to maintain certain policies now in place—preventing a significant increase in individual income taxes in 2026, for example—the result would be even larger increases in debt,” said the CBO report.
Increased debt and interest payments crowd out funding for discretionary programs like education, infrastructure, and science research and development. Growing interest also works to lower incomes by increasing inflation.
National security issues arise as interest payments grow. As unsustainable debt levels weaken America’s reputation abroad, defense spending is also crowded out by interest costs. The national debt is “the greatest threat to our national security,” according to former chairman of the Joint Chiefs of Staff Mike Mullen.
National Intelligence Director Dan Coats said in February that he was “concerned that our increasing, fractious political process, particularly with respect to federal spending, is threatening our ability to properly defend our nation.”
Trump’s trade war with China, Mexico, Canada and Europe is also contributing to a potential decline in the economy. “Our calculations suggest that a major trade war would lead to a significant reduction in growth,” wrote Bank of America Merrill Lynch’s economist Ethan Harris in a research note. “A decline in confidence and supply chain disruptions could amplify the trade shock, leading to an outright recession.”
The United States is currently more than $20 trillion in debt.