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The Financial Express
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US federal debt to reach nearly twice economy's size in 2050: CBO

| Updated: September 26, 2020 17:29:25


File photo used for representational purpose File photo used for representational purpose

US federal debt is projected to reach nearly twice the size of the economy in 2050, driven by the massive fiscal response to the COVID-19-induced recession, the Congressional Budget Office (CBO) said Monday in a report.

"Even after the effects of the 2020 coronavirus pandemic fade, deficits in coming decades are projected to be large by historical standards," the report said, expecting the federal deficit to increase from 5 percent of US gross domestic product (GDP) in 2030 to 13 per cent in 2050, reports Xinhua.

The projected budget deficits will boost federal debt from 98 per cent of GDP in 2020 to 195 per cent of GDP in 2050, just below twice the economy's total size, according to the CBO.

"High and rising federal debt makes the economy more vulnerable to rising interest rates and, depending on how that debt is financed, rising inflation," the report said, warning the growing debt burden also raises borrowing costs and increases the risk of a fiscal crisis.

"CBO's report shows 30 straight years of trillion-dollar deficits that grow and grow, leaving no doubt that we're on a dangerous and unsustainable fiscal path," Michael A. Peterson, CEO of the Peter G. Peterson Foundation, said Monday in a statement.

"Unfortunately, the coronavirus crisis has simply accelerated an already unsustainable fiscal trajectory, because of its devastating effect on the economy and the necessary legislative response," Peterson said.

"Once we have emerged from the pandemic, it will be more important and urgent than ever for our leaders to manage our debt, to ensure that America is more prepared for the future, better positioned for widespread and inclusive growth, and meeting our moral obligation to future generations," he added.

The International Monetary Fund also warned in June that the US public debt is on an unsustainable path, and policy adjustments are needed to lower the fiscal deficit and to put public debt on a gradual downward path over the medium term.

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