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Stay Hungry. Stay Foolish.

A blog by Leon Oudejans

U.S. Federal Debt 195% of GDP in 2050 (Bloomberg/Washington Times)

26 September 2020


Bloomberg title: CBO Sees U.S. Federal Debt Almost Double Economy’s Size in 2050

Date: 21 September 2020

“The U.S. government’s debt will swell over the next 30 years to almost double the size of the economy, raising the risk of a fiscal crisis or a drop in the value of Treasuries, the Congressional Budget Office said Monday.

The nonpartisan agency, in its long-term budget outlook, projected debt will reach 195% of gross domestic product in 2050, up from 98% this year and 79% in 2019. That compares with the prior 2050 forecast of 180% from January, before the coronavirus pandemic struck the nation and spurred Congress to pass about $3 trillion of stimulus.

While low interest rates “indicate that the debt is manageable for now and that fiscal policy could be used to address national priorities,” the budget path is unsustainable over the coming decades and borrowing costs will eventually become an issue, CBO Director Phillip Swagel said in a statement.

Some scholars are increasingly taking issue with such views in recent years. The school of Modern Monetary Theory argues that countries like the U.S., which borrow in their own currency, don’t need to worry about boosting debt to support growth, so long as inflation remains under control.”



The Washington TimesCongressional Budget Office: Federal debt nears ‘unsustainable’ levels

Date: 21 September 2020

“Federal debt is nearing “unsustainable” levels, but low interest rates have created a window of opportunity for policymakers to rein it in, the Congressional Budget Office said Monday, delivering a mixed forecast for the government’s long-term outlook.

Federal spending, currently 21% of gross domestic product, will rise to 31% by 2050, with most of that increase coming from interest payments on the rising debt, said CBO Director Phillip L. Swagel. Federal revenue, meanwhile, stood at just 16% of GDP last year and will reach only 19% by 2050.

The gap between the spending and revenue numbers illustrates the problem.

“The fiscal path over the coming decades is unsustainable,” Mr. Swagel said in a stark statement describing CBO’s findings.

Federal debt held by the public will reach 98% of gross domestic product this year and will cross the 100% threshold next year.

It will reach a record 107% in 2023, and by 2050 — the end of CBO’s budget window — it will be a staggering 195% of GDP.

Both Republicans and Democrats on Capitol Hill said they heard the warning, though solutions remain elusive.”



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