By Richard Cowan
WASHINGTON (Reuters) - The U.S. Congressional Budget Office on Thursday projected significant increases in federal budget deficits and debt over the next 30 years, in part due to rapidly rising interest costs, as it sketched out sluggish economic growth and a shrinking workforce.
The CBO's latest long-term budget projections show federal deficits accelerating to 7.3% of the economy in fiscal year 2055 from 6.2% in 2025. That is up from the 30-year average from 1995 to 2024 of 3.9%.
The U.S. public debt meanwhile is seen rising alarmingly, to 156% of GDP in 2055 from 100% in 2025.
As the non-partisan budget analyst for Congress, the CBO bases its projections on current law, which could change significantly in the short-term.
That is due in part to the push now underway by President Donald Trump and his fellow Republicans who control the U.S. Senate and House of Representatives to slash federal spending and the government's workforce, while also extending costly tax cuts that are due to expire at the end of this year under current law.
“As bad as this outlook is, it represents an 'optimistic scenario,’ because policymakers are currently considering adding trillions more in tax cut extensions, which would add to the debt," said Michael Peterson, head of the Peter G. Peterson Foundation, which advocates fiscal policy reforms.
There are estimates that extending those tax cuts for a decade could add around $4.6 trillion to deficits and debt. House Republicans have proposed spending cuts, including to federal healthcare programs, to achieve some savings.
Trump also has ordered tough border security measures and efforts to deport immigrants that experts see potentially denting the economy as a result of labor shortages.
Whether or not Congress will be able to pass legislation implementing Trump's agenda could be determined over the next several months.
Another unknown factor is the outcome of court challenges to Trump policies that already are pending. The CBO does not include any consideration of the outcome of those court cases in its long-term projections.
The report also does not factor in the potential impact on the U.S. economy from a broad range of tariffs Trump is implementing against foreign goods.
"Mounting debt would slow economic growth, push up interest payments to foreign holders of U.S. debt and pose significant risks to the fiscal and economic outlook," the Long-Term Budget Outlook: 2025 to 2055 stated.
Of particular note, government interest payments on its ballooning debt were projected at 5.4% of GDP in fiscal year 2055, up from the anticipated 3.2% in the current fiscal year that ends on September 30.