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Bonds News

CBO says U.S. debt to rise faster than previously expected

WASHINGTON, July 12 (Reuters) - The U.S. debt will rise faster than previously expected over the next two decades due to slower economic growth and congressional approval for tax cuts last year, the Congressional Budget Office said on Tuesday.

In its latest report, CBO projected the federal debt will climb from a current 75 percent of gross domestic product to 122 percent by 2040. That is up from CBO’s previous estimate of 107 percent for 2040 and well above a post-World War Two peak of 106 percent of GDP.

For 2046, CBO lowered its debt projection by 14 percentage points to 141 percent of GDP, saying it now expects interest rates to be lower than previously anticipated.

Federal debt held by the public has nearly doubled since 2008 in the wake of the recession and will continue to rise without changes in tax and spending policy, CBO said. Factors driving the increase also include rising costs for Social Security retirement benefits and the Medicare healthcare program for the elderly, as the baby-boom generation retires.

To keep federal debt at its current 75 percent of GDP, CBO said policymakers would need to agree on a package of spending cuts, tax increases or both, equaling 1.7 percent of GDP per year. In 2017 alone, the prescribed change would equal $330 billion or $1,000 per person in the United States. (Reporting by David Morgan; Editing by Chris Reese)

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