The Congressional Budget Office (CBO) just released its latest report projecting what the federal budget and the economy would look like over the next 10 years if laws governing taxes and spending generally remained unchanged. Per the CBO, relative to the size of the economy, the federal debt swells from 2024 to 2034 as increases in interest costs and mandatory spending outpace decreases in discretionary spending and growth in revenues. The federal debt rises from 99% of GDP this year to 122% in 2034, surpassing its previous high of 106 percent of GDP. Here’s the chart:
Unfortunately, US economic growth is projected to settle at roughly 1.8 percent in 2026 and later years, too low by itself to generate enough tax revenue to pay down that debt to a manageable level. The reason for the economic slowdown is largely structural: too many old people and too few working adults. An obvious way to rectify this situation is to import more working adults via legal immigration. That, and increase labor productivity. Otherwise, we’re looking at higher taxes and lower spending, one way or the other - assuming the governing class can muster sufficient courage to do the right thing.