The federal government faces an unsustainable long-term fiscal future. At the end of fiscal year 2022, debt held by the public was about 97 percent of gross domestic product (GDP). Projections from the Office of Management and Budget and the Department of the Treasury, the Congressional Budget Office, and GAO all show that current fiscal policy is unsustainable over the long term. Debt held by the public is projected to grow at a faster pace than the size of the economy. Debt held by the public is projected to reach its historical high of 106 percent of GDP within 10 years and to continue to grow at an increasing pace. GAO projects that this ratio could reach more than twice the size of the economy by 2051, absent any changes in revenue and spending policies.

Net interest spending will continue to increase because of both higher levels of overall debt, and projected increases in interest rates over the long-term. Higher than projected interest rates would further increase interest costs and debt. In addition to increased borrowing costs, rising debt could lead to slower economic growth.

Other potential fiscal risks stem from delays in raising or suspending the debt limit—the legal limit on the total amount of money that the federal government is authorized to borrow to meet its existing legal obligations. These delays could create disruptions to financial markets, and investors may require higher interest rates to hedge against increased risks, which, in turn, could increase borrowing costs. Failure to raise the debt limit in time to prevent a default would have much more dire economic and reputational consequences.

[OCS: Everybody knew the deadline, yet both sides did nothing. Wanting to create a crisis, grab media face-time, and push through untenable provisions that would typically be negotiated away.]

<Source: Highlights/Full Report>