U.S. on Track to Add $19 Trillion in New Debt Over 10 Years

WASHINGTON — The United States is on track to add nearly $19 trillion to its national debt over the next decade, $3 trillion more than previously forecast, due to interest payments, healthcare of veterans, benefits for retirees and the military, the Congressional Budget Office said Wednesday.

The new forecasts, published Wednesday afternoon, predict a $1.4 trillion gap year between what the government spends and what it receives from tax revenues. Over the next decade, the deficit will average $2 trillion per year, as tax revenues fail to keep pace with the rising costs of Social Security and Medicare benefits for boomers. retired population.

To put those numbers in context, the total amount of debt held by the public would equal the total annual output of the US economy in 2024, growing to 118% of the economy by 2033.

Congress’s nonpartisan budget scorer now forecasts that the U.S. economy will grow barely this year, adjusted for inflation, and unemployment will rise above 5%, before growth again next year. It attributes the slowdown in growth to the Federal Reserve’s campaign to tame inflation by interest rate increaseaimed at cooling down the economy and the labor market.

Forecasts may be intensify a partisan debate between President Biden and House Republicans on taxes, spending and the nation’s debt limit. Republican Party is refuse to increase cap, which limits the total amount of debt the federal government can issue, unless Mr. Biden agrees to drastic but unspecified spending cuts. That denial threatens caused a financial crisis and recession if the government cannot pay all its bills on time.

The budget office said in a separate report on Wednesday that such a crisis could happen as soon as July – and possibly even earlier – if lawmakers do not agree to increase the 31st limit. $0.4 trillion that the government technically achieved last month.

While Republican lawmakers blamed Biden and Democrats for the growing deficit, the report makes clear that bipartisan legislation — and the Fed’s rate hikes — is to blame for the projections. debt report skyrocketed.

The budget office said new legislation enacted over the past nine months would add about $1.5 trillion to the cumulative deficit over the next decade. More than half of that increase came from a single law: one expanding health care benefits for veterans who have been exposed to toxic burn pits. That bill passed overwhelmingly in the House and Senate, with a majority of Republicans in both houses voting in favor. Another $550 billion in additional deficit is due to increase military spendingIt also has strong bipartisan support.

By contrast, the budget office said Mr. Biden climate, tax and healthcare bills, passed with only Democratic votes, would slightly reduce the deficit over the next decade. That’s because the bill’s spending and tax credits have been more than offset by tax increases for corporations and high earners, along with efforts to reduce government spending on drugs under prescription for retirees.

The report also shows the extent to which the Fed’s campaign to curb high inflation, by rapidly and aggressively raising interest rates, will raise the cost of federal borrowing in the coming years. The Fed raised interest rates to about 4.5% to 4.75% from near 0% a year ago and is expected to continue to raise borrowing costs over the next few months.

Since the budget office last released its forecast in May, the government’s short and long term borrowing costs has grown significantly. The budget office now predicts that federal interest expenses will total $10.4 trillion over the next decade, up from $8 trillion in May. Those costs will be partially offset by about $1 trillion in tax increases as high inflation increases nominal incomes for workers.

There is no indication in the report that the size of the federal debt is driving economic growth or will soon. But officials warn that, in the long run, policymakers will need to change the nation’s fiscal path, which could come from raising taxes, cutting spending, or both.

The director of the budget office, Phillip L. Swagel, wrote in the report: “Over the longer term, our projections suggest that changes in fiscal policy will need to be made to address day-to-day interest expenses. increase and mitigate other adverse consequences of high and rising debt”. a letter to accompany the report.

America’s $31.4 trillion national debt is product of policy choices and economic shocks, largely since the turn of the century, when the federal government last spent less money than it collected in taxes. The tax cuts signed into law by Presidents George W. Bush, Barack Obama and Donald J. Trump have reduced government revenue. The wars in Iraq and Afghanistan that began under Bush were not offset by tax increases. Mr. Obama, Mr. Trump and Mr. Biden signed trillions of dollars in emergency spending to combat the 2008 financial crisis and the 2020 recession pandemic.

A new report from the budget office confirms what analysts have predicted for years: that the cost of providing Social Security and Medicare benefits to baby boomers nearing retirement will increase rapidly over the next decade.

Mr. Biden is preparing on Wednesday to retaliate against Republicans over the debt, highlighting a new House majority’s plan to extend expiring tax cuts that were signed into law under Mr. Trump. and repeal the tax increases for high-income earners and corporations that Mr. Biden signed into law last year.

“Let’s be clear about what’s going on,” Biden was due to speak at an event in Maryland, according to experts speaking in advance released by the White House. “If you add up all the proposals my Republican friends in Congress have made so far, they add $3 trillion to the debt over 10 years.”