Subscribe to Moneycontrol Pro and get 365 bonus InterMiles! Use Code: INTERMILES
you are here: HomeNewsWorld
Last Updated : Sep 22, 2020 12:23 PM IST | Source: Reuters

Coronavirus recession to push US debt to nearly twice GDP by 2050: CBO

Without changes to tax and spending laws, the federal debt held by the public will reach 195% of GDP by 2050, the CBO said in its long-term budget outlook - a level approaching the current debt ratios of Japan and Greece.


The coronavirus pandemic will darken the U.S. long-term fiscal outlook for decades to come, the Congressional Budget Office said, releasing new forecasts that show federal government debt in 2050 will be nearly twice U.S. economic output.

Without changes to tax and spending laws, the federal debt held by the public will reach 195% of GDP by 2050, the CBO said in its long-term budget outlook - a level approaching the current debt ratios of Japan and Greece.


The non-partisan congressional budget referee said its outlook had deteriorated significantly from a year ago, when it projected U.S. public debt in 2049 would be 144% of GDP. CBO projects federal debt at 98% by the end of 2020, compared with 79% in 2019 and 35% in 2007 before a major financial crisis.

COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more

The debt is being propelled by higher U.S. annual budget deficits driven by a slow recovery from a deep pandemic recession, higher interest costs to finance those deficits, and long-anticipated spending growth associated with an aging population on healthcare programs and Social Security.

CBO projects the 2020 deficit reaching 16% of GDP - the highest since the end of World War Two in 1945. While the share will fall for several years, it will begin rising sharply again by 2028.

By 2050, the annual deficit is projected at 12.6% of GDP as revenue growth falls far behind spending growth, CBO said.

The debt swells considerably after 2030, when the CBO assumes that interest rates rise significantly from historically low levels. The projections assume that the average real interest rate on benchmark 10-year Treasury notes would be 0.9% through 2030, then rise steadily, reaching 2.5% in 2050.

CBO director Philip Swagel said that the long-term U.S. fiscal path is unsustainable, putting long-term confidence in the dollar at risk.

"There is no set tipping point at which a fiscal crisis becomes likely or imminent, nor is there an identifiable point at which interest costs as a percentage of GDP become unsustainable," Swagel said in a statement. "But as the debt grows, the risks become greater."
First Published on Sep 22, 2020 09:50 am