US national debt to exceed $50 trillion by 2034, budget watchdog estimates

As lawmakers grapple with increasing defense demands and spending on social safety net programs, the Congressional Budget Office projected on June 18 that the federal debt will equal 122 percent of the United States’ annual economic output by 2034, far surpassing the high set in the aftermath of World War II, Report informs referring to The Washington Post.

The deficit will swell to $1.9 trillion this fiscal year and keep growing until the overall national debt hits $50.7 trillion a decade from now, Congress’s nonpartisan bookkeeper said in its latest report. The group revised its forecast from four months ago, when it projected that the debt would reach $48.3 trillion in 2034, and 116 percent of economic output.

The new figures add to the urgency facing policymakers in 2025 — and on the campaign trail — to tackle the nation’s financial health. Next year, vast portions of the tax code are set to expire, potentially forcing a steep tax hike on individuals and families. Congress suspended the debt limit in 2023, but that, too, will expire next year, setting up a showdown between the two parties over federal spending.

And Medicare and Social Security are running low on funds, which could force a benefit cut for tens of millions of Americans just as the national debt crescendos.

The debt burden could present risks in bond markets as creditors look increasingly skeptically at the government’s ability to make good on its ballooning borrowing, experts say. A high debt balance would probably also keep federal interest rates high, forcing Congress to divert a significant amount of tax revenue to debt service.

The US has $34.7 trillion of debt, according to the Treasury, the vast majority of which is held by the public through bonds and other borrowing instruments. The cost of that debt keeps climbing as the federal government spends more — and must borrow to afford it. The rest of the debt is held by other government programs, such as Social Security and Medicare, that have taken in more money than they’ve paid out.

Already in the 2024 fiscal year, which ends September 30, interest payments are set to eclipse the size of the United States’ massive defense spending. Rates shot up over the past several years as the Federal Reserve has tried to wrestle inflation under control.