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The US debt mountain will grow by $19 trillion over the next ten years. That’s three trillion more than previously forecast, blown up by higher interest costs, but also by pensions, health care for veterans and the elderly, military spending, stimulus programs.
Revised Estimates
The new estimate comes from the Congressional Budget Office, the non-partisan budget office of the House of Representatives. He got there by calculating the annual deficits, which should gradually increase the debt burden if nothing changes: they will amount to 1,400 billion lire this year and average two trillion a year in the following period. In the further course, the total debt of the general public, i.e. not between federal authorities, corresponds to the GDP in 2024 and equal to 118% of the economic output in 2033.
New laws
A slew of recent legislation, notably a significant expansion of veteran assistance, will add a total of $1.5 trillion to the debt over a 10-year period. The increase in military spending, now driven by the conflict in Ukraine and tensions with China, will burden public finances with a further cumulative deficit of 550 billion. Interest on debt will rise to $10.4 trillion over the next decade, up $2.4 trillion from previous estimates, as the Federal Reserve tightens interest rates. The debt also includes the impact of large stimulus programs, such as investments in the semiconductor industry and in the energy transition (but the anti-inflation law, which contains the environmental strategy, has a positive impact through new taxes and savings elsewhere).
A burden that comes from far away
The spiral of debt actually comes from far away. It worsened significantly after the great financial and economic crisis of 2008 and after the pandemic crisis of 2020, which were fought with massive spending measures. Tax relief laws and the costs of the conflicts in Iraq and Afghanistan, which were not compensated for by new revenues, also had a strong impact.
An alarm, immediately and for the future
The CBO’s message is clear. “In the longer term, our projections suggest changes will need to be made in fiscal policy,” he said. But it wasn’t just a long-term warning. It has also sounded the alarm about the risk of default – or government paralysis – if Washington fails to address the debt ceiling mechanism. He pointed out that these dangers could materialize between July and September. It is an alarm that has already been sounded by the Joe Biden administration.