New Report: Rising National Debt Will Cause Significant Damage to the U.S. Economy
Last Updated May 19, 2025
A new macroeconomic analysis shows the significant negative impact that the rising national debt will have on America’s future economy. Based on analysis conducted by EY’s Quantitative Economics and Statistics (QUEST) practice, the report projects the impact of rising debt on key macroeconomic indicators that affect the quality of life for every American, including gross domestic product (GDP), jobs, capital investment and wages.
The report finds that, relative to stabilized debt and scaled to the 2026 economy, the current path of growing national debt will:
- Reduce the size of the economy by $340 billion in 2035, $1.1 trillion in 2055, and $1.8 trillion in 2075
- Reduce the number of U.S. jobs by 1.2 million in 2035, 2.7 million in 2055, and 3.6 million in 2075
- Reduce private investment by 13.6 percent in 2035, 17.1 percent in 2055, and 21.6 percent in 2075
- Decrease wages by 0.6 percent in 2035, 3.0 percent in 2055, and 5.3 percent in 2075 (“wages” refers to wage rates, the effective rate of pay per hour, even for salaried workers)
This report highlights the negative impacts of the fiscal path that the United States is already on — current data from the Congressional Budget Office shows the debt rising by $22 trillion over the next 10 years, with debt-to-GDP reaching 156 percent by 2055.
This report is being released as lawmakers consider a range of policies that would make our debt path even worse. Budget reconciliation proposals could add trillions to the national debt over the next 10 years. Worse yet, Congress is considering gimmicks that would ignore the cost of tax cut extensions in order to circumvent Senate rules and make certain changes permanent. This would expand the debt by even greater amounts in decades to come. If not offset with spending cuts or other tax increases, those budgetary choices would dramatically worsen the already dismal negative impacts presented in EY’s analysis.
Rising Debt Will Reduce GDP
The current trajectory of U.S. debt will have a dramatic downward impact on the size of the economy over the long term. Compared to stabilized debt, our current fiscal path will reduce U.S. GDP by $340 billion, or 1.1 percent in 2035; $1.1 trillion, or 3.5 percent in 2055; and $1.8 trillion, or 5.6 percent in 2075. To be clear, these economic losses are per year, and thus the cumulative effect is even greater.
Rising Debt Will Eliminate Millions of Jobs
The impact of our growing debt on the economy will also negatively affect the labor market. Our current damaging fiscal path will eliminate 1.2 million jobs by 2035, 2.7 million by 2066, and 3.6 million by 2075, as compared to stabilized debt.
Rising Debt Will Reduce Investment
Growing the national debt will also negatively impact the level of private investment in the U.S., which contributes to the negative impacts on the economy. Referred to as “crowding out,” increased borrowing by the federal government means less capital is available as investors buy federal debt rather than investing into private enterprises. The report finds that that this is the most significant contributor to the long-term negative damage that rising federal debt has on the economy. Compared to policies that stabilize the debt, the current fiscal path will result in 13.6 percent less private investment in 2035, 17.1 percent less in 2055, and 21.6 percent less in 2075.
Rising Debt Will Lower Incomes
Rising federal debt will also impact Americans’ wallets by decreasing wages. Over the long term, take home pay will be 5.3 percent lower than if lawmakers adopted policies to stabilize the national debt.
Conclusion
As it stands today, the rising debt under the federal fiscal outlook will do significant damage to America’s economy and the quality of life for its citizens. On our current path, we will add $22 trillion to the national debt over the next ten years, and debt-to-GDP is projected to reach 156 percent in 2055 (up from 100 percent in 2025).
Worse yet, Congress is currently considering budget changes that would significantly increase these levels — potentially allowing trillions more in debt over the next 10 years, with much greater increases in coming decades if they use gimmicks to permanently extend these policies.
This new analysis from EY reveals the damage that growing debt will have on America’s economic future. On all key financial metrics, from GDP and investment to jobs to wages, the growing debt harms future economic prospects for American citizens.
In order to put the nation on a more sustainable and prosperous path, lawmakers should prioritize comprehensive fiscal solutions that stabilize the debt. There are many fiscal options available, and doing so would reverse the many projected negative consequences described in the report.
Photo by Spencer Platt/Staff/Getty Images
Further Reading
The National Debt Can Crowd Out Investments in the Economy — Here’s How
Large amounts of federal debt could “crowd out” investments by the private sector, making the economy less productive and stunting wage growth.
National Debt Puts Upward Pressure on Inflation and Interest Rates
America’s unsustainable fiscal outlook can have “significant consequences for price stability, interest rates, and overall economic performance,” according to a new report.
Why Is the Federal Deficit High If Unemployment Is Low?
The U.S. is experiencing an unusual and concerning phenomenon — the annual deficit is high even though the unemployment rate is low.