The Congressional Budget Office (CBO) has projected that the U.S. government will face a budget deficit of $1.4 trillion in 2023, about $400 billion more than it was last May, and a shortfall of $2.7 trillion in 2033. This is significantly larger than the 3.6 percent of GDP that deficits have averaged over the past five decades. The CBO has also estimated that debt held by the public will rise from 98% of GDP in 2023 to 118.2% of GDP in 2033.
The CBO estimates that the annual total budget deficit will double from $1.41 trillion in 2023 to $2.851 trillion in 2033. In the meantime, net interest expenses on an annual basis are expected to increase from $640 billion in 2023 to $1.429 trillion in 2033. The agency has also warned that the extraordinary measures the Treasury is taking to pay America's bills will run out between July and September if the debt limit is not raised or suspended.
The CBO also predicts “stagnant output, rising unemployment, gradually slowing inflation, and interest rates that remain at or above their levels at the beginning of the year – before the economy subsequently rebounds”. The agency expects inflation to decline this year and the unemployment rate to rise through early 2024, reflecting the slowdown in economic growth.
Treasury Secretary Janet Yellen has urged Congress to act as soon as possible to address the debt ceiling and avoid the government's first ever credit default, which would have catastrophic economic consequences. The Biden administration has made it clear that they will not discuss the debt ceiling and that spending should be discussed independently.
The Congressional Budget Office's report serves as a dire reminder that Congress must take action without delay in order to avert a disastrous default. Increasing the debt ceiling does not authorize additional expenditures. It simply allows the government to pay creditors what it already owes. To address the rising costs of interest and mitigate other adverse consequences of high and rising debt, the CBO suggests changes in fiscal policy must be made.
0. “Congress needs to act soon to avoid catastrophic US debt default, CBO report warns” CNN, 15 Feb. 2023, https://www.cnn.com/2023/02/15/politics/debt-ceiling-default-cbo-congress/index.html
1. “Deficit set to hit $1.4T this year amid persistent inflation, federal experts say” POLITICO, 15 Feb. 2023, https://www.politico.com/news/2023/02/15/inflation-persist-until-2026-federal-experts-00083033
2. “US national debt to rise by $20 trillion over the next 10 years: CBO” Fox Business, 15 Feb. 2023, https://www.foxbusiness.com/politics/us-national-debt-rise-20-trillion-over-next-10-years-cbo
3. “Debt ceiling: CBO finds government could be at risk of default ‘between July and September’” Yahoo News, 15 Feb. 2023, https://news.yahoo.com/debt-ceiling-cbo-finds-government-could-be-at-risk-of-default-between-july-and-september-193301099.html
4. “U.S. deficits are set to surge over next decade, Congressional Budget Office says” Axios, 15 Feb. 2023, https://www.axios.com/2023/02/15/cbo-deficit-debt-ceiling-2023
5. “CBO report: U.S. could default as soon as July if debt limit isn't addressed” Yahoo Sports, 15 Feb. 2023, https://sports.yahoo.com/cbo-report-u-could-default-201242150.html
6. “US risks default as soon as July unless debt ceiling is raised, agency estimates” KGO-TV, 15 Feb. 2023, https://abc7news.com/us-risks-default-as-soon-as-july-unless-debt-ceiling-is-raised-age/12820284
7. “U.S. on Track to Add $19 Trillion in New Debt Over 10 Years” SupplyChainBrain, 15 Feb. 2023, https://www.supplychainbrain.com/articles/36648-us-on-track-to-add-19-trillion-in-new-debt-over-10-years