A new report from the Congressional Budget Office projects a grim fiscal outlook for the United States, which is seeing rising red ink under President TrumpDonald John TrumpCohen’s lawyers argue 12,000 items protected by attorney-client privilege: reports Former migrant detention facility worker leaks footage from inside facility to MSNBC Trump misidentifies Appalachian Trail as ‘Tallahassee Trail’ while mocking Sanford MORE .
In 30 years, the U.S. debt burden is projected to double, eclipsing even the debt carried by the United States during World War II.
Payments the U.S. government makes to China and others holding U.S. debt would surpass projected Social Security spending in 2048, the report found.
Most of the rising debt is related to an aging population and rising entitlement spending, problems that were bedeviling the United States well before Trump’s election.
At the same time, the tax-cut law signed by Trump and passed by the GOP Congress is adding to the short-term debt by reducing government revenue. Increased spending agreed to by both parties is also pushing up deficits.
CBO reports that the GOP tax law will keep revenues flat until a handful of its provisions expire in 2026 – assuming they are not extended.
The rising red ink has been a worry for congressional Republicans, who sought earlier this year to claw back spending already appropriated through a rarely-used rescission package.
That bill, which would have clawed back only $15 billion in spending, passed the House but died in the Senate.
The main drivers of long-term debt are increased spending on Social Security, health programs such as Medicare and Medicaid and increasing interest payments.
“Most of the spending growth for Social Security and Medicare result from the aging of the population,” said CBO Director Keith Hall.
“Revenues, in contrast, are projected to be roughly flat over the next few years in relation to GDP,” he said.
Interest payments will also exceed discretionary spending, the amount that Congress approves for defense and nondefense spending each year, which is projected to hit 5.4 percent of GDP by 2048.
CBO warned that the higher debt levels also increase the chances of a fiscal crisis, while reducing the government’s ability to respond to unforeseen events.
Trump and his allies in Congress have argued that an expanding economy is the key to drive down debt, but the growth necessary to do so would have to be historic. CBO projected that growth would spike briefly as a result of the tax and spend policies, but quickly fall back to a long-term average of just 1.9 percent.
To keep the debt burden at its current level, Congress would have to cut spending or increase revenues by a combined 1.9 percent of GDP every year. That amounts to a 10 percent cut in spending and an 11 percent increase in tax revenue, or some combination of the two.
In 2019 alone, that would amount to a tax increase that would add $1,300 in taxes for people in the middle of the tax distribution, or, alternatively, a Social Security cut that would reduce payments by $1,800 for people in the middle of the lifetime earnings distribution.