MNI POLICY: US Debt Could Reach 623% of GDP by 2095--Treasury

The U.S. federal debt will grow to more than six times the size of the economy over the next seven decades, increasing the risk of a fiscal crisis over time, the Treasury Department said Thursday.

"The long-term fiscal projections indicate that the government's debt-to-GDP ratio will rise to 623 percent over the 75-year projection period, and will continue to rise thereafter, if current policy is kept in place," Treasury said in its annual report. The debt-to-GDP at the end of September was 100 percent.

The projections assume current policy will continue indefinitely, and shows that it is "nearly certain that current fiscal policies cannot be sustained indefinitely," Treasury said.

Preventing the debt-to-GDP ratio from rising over the next 75 years is estimated to require some combination of spending reductions and revenue increases that amount to 5.4% of GDP.

The projections will likely underpin opposition by Republicans to President Joe Biden's infrastructure plan, and could also concern some Democratic lawmakers, who have advocated for including tax increases to fund the longer-term plan.

Federal Reserve Chair Jerome Powell said Thursday that U.S. government spending is on an unsustainable path, with debt growing faster than the economy.

"That doesn't mean that the level of the debt today is unsustainable," he said, noting the low level of interest rates. But when the economy is strong it "will be appropriate to return to the issue of getting back on a sustainable fiscal path."