The U. S. is projected to face a critical financial milestone by 2045 where the average interest rate on national debt will surpass the economic growth rate. This situation could lead to a debt spiral, as warned by analysts from a budget watchdog group.
• Interest costs are estimated to reach a record 3. 2 percent of GDP this year, exceeding expenses for defense and Medicare. This is predicted to rise to 5. 4 percent by 2055.
• If the average interest rate becomes higher than the economic growth rate by 2045, this could initiate a debt spiral, creating severe economic issues.
• Rising debt and deficits may lead to several negative outcomes, including slowed income growth, increased interest rates for the national debt, greater geopolitical risks, and a heavier burden on future generations.
• There is a concerning rise in the national debt, which could grow from 100 percent of GDP in FY 2025 to 156 percent by 2055.
• Annual budget deficits are expected to increase from 6. 2 percent of GDP in 2025 to 7. 3 percent by 2055, marking the highest rates seen outside of major crises.
• The Social Security fund is at risk of insolvency, projected to run out of reserves by 2033, leading to significant cuts in benefits.
• Policymakers need to address the issues of debt and deficit urgently, with recommendations against extending the 2017 Tax Cuts and Jobs Act without securing adequate offsets.
• Future tax revenues are likely to fall short, which will not bridge the increasing deficit gap since spending is expected to outpace tax collection.
• The CBO forecasts slow economic growth over the next decade, highlighting the necessity for responsible tax-related policy decisions to stimulate growth without worsening national debt.
The CBO's recent report serves as a warning sign for U. S. leaders to control spending to prevent the federal debt from reaching unsustainable levels. Urgent action is required as the nation faces financial challenges that could have significant implications for its fiscal health and economic stability in the coming decades.
https://justthenews.com/government/congress/us-debt-track-exceed-economic-growth-2045-cbo
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