National Debt Projected to Hit 175% GDP; Interest Totals $99 Trillion
One year after policymakers enacted the most expensive reconciliation legislation in recent history, the nonpartisan Congressional Budget Office (CBO) has released long-term budget projections that reflect significant deterioration in the nation’s fiscal trajectory. Compared with the previous 30-year projections, spending will be higher, revenues lower, interest rates and interest payments elevated, and the national debt significantly larger.
Here are seven key takeaways from CBO’s latest projections.
1. The national debt will be substantially higher by 2056.
Debt held by the public equaled 99 percent of gross domestic product (GDP) at the end of fiscal year 2025. Under current law, CBO projects that ratio will climb dramatically — reaching 175 percent of GDP in 2056.
2. The mismatch between revenues and spending will continue to grow.
The primary driver of the nation’s rising debt is the structural mismatch between federal receipts and outlays. CBO projects that outlays will climb from 23.1 percent of GDP in 2025 to 27.9 percent in 2056. CBO also projects that revenues will rise over the next 30 years relative to the size of the economy, but at a slower pace, reaching 18.8 percent of GDP in 2056. That represents a step back from the previous publication, which expected revenues to reach 19.3 percent of GDP. Note, also, that these estimates were prepared prior to the U.S. Supreme Court’s determination that a significant share of new tariff collections were unlawful – which strongly suggests future revenue collections could be weaker still.
3. Social Security and Medicare will drive the growth in programmatic spending.
The aging of the population and rising healthcare costs will cause spending on Social Security and federal healthcare programs, primarily Medicare, to continue climbing over the next 30 years. Federal spending on Medicare (net of premiums and other receipts) will increase from 3.3 percent of GDP in 2025 to 5.5 percent by 2056, while outlays for Social Security will climb from 5.2 percent of GDP to 6.0 percent over that period.
4. Interest rates are anticipated to climb over the next 30 years.
CBO anticipates that the average interest rate on outstanding debt will be 3.4 percent in 2025, double the rate from 2021. Continuing that trend, CBO expects the average interest rate on the debt to reach 4.2 by 2056.
5. We are projected to spend a staggering $99 trillion on interest alone.
In CBO’s projections, interest costs would reach 3.3 percent of GDP in 2026, near the post-World War II high for that ratio, set in 1991. Interest costs would continue to climb over the coming decades, reaching 6.9 percent of GDP by 2056. At that point, interest payments would account for a quarter of all federal spending and 37 percent of revenues. Interest costs are on track to become the largest “program” in the federal budget. Interest outlays have already surpassed defense spending, will eclipse Medicare in 2028, and finally overtake Social Security in 2047, becoming the single largest category in the budget. All told, over the next three decades, CBO projects the United States will spend a cumulative $99 trillion on interest costs alone.
6. The Social Security trust fund for retirement is expected to be depleted within six years, and the Medicare Hospital Insurance trust fund is expected to be depleted eight years later.
CBO projects that the balance of Social Security’s Old-Age and Survivors’ Insurance (OASI) Trust Fund will be depleted in 2032, within its 10-year projections. At the time of depletion, the program will be unable to pay its full obligations, and an automatic 23 percent reduction in benefits would take effect. Similarly, CBO projects that the Hospital Insurance (HI) Trust Fund, which finances Medicare, is projected to be depleted in 2040. That is 12 years sooner than last year's projections, yet it is more optimistic than that from the most recent Medicare Trustees Report, which projects the trust fund to be depleted by 2033.
7. Real GDP growth is projected to average below 2 percent annually over the next 30 years.
Over the long term, CBO projects that real GDP growth will be below 2 percent each year starting in 2027 — falling from 2.4 percent in 2026 to 1.5 percent by the end of the 30-year horizon. Over that 30-year horizon, real GDP growth is expected to average 1.7 percent.
The most recent projections from CBO confirm that the United States is failing to address its unsustainable fiscal future. Last year, lawmakers had the opportunity through reconciliation to improve our fiscal condition and address the structural imbalance between spending and revenues. Instead, interest costs are on track to drive spending projections higher than before, while legislation has reduced expected revenues. As a result, the debt outlook is more daunting than ever before.
Photo by Anna Moneymaker/Getty Images
Further Reading
Federal Healthcare Costs on Track to Reach $3.1 Trillion by 2036
Federal healthcare programs are among the fastest-growing drivers of federal spending, and their continued growth will put significant upward pressure on the national debt.
Quarterly Treasury Refunding Statement: Higher Borrowing Compared to Last Year
Key highlights from the most recent Quarterly Refunding include an increase in anticipated borrowing of $249 billion compared to the same period in the previous year.
The Federal Government Has Borrowed Trillions. Who Owns All that Debt?
Most federal debt is owed to domestic holders, but foreign ownership is much higher now than it was about 50 years ago.