USA facing enormous debt burden: CBO warns of dangerous increase!

USA facing enormous debt burden: CBO warns of dangerous increase!

Current U.S. public finances are on a troubling path. According to the latest estimates from the Congressional Budget Office (CBO), national debt is expected to rise from 98% to 117% of gross domestic product (GDP) over the next decade. This forecast was released on May 30, 2025 and challenges the CBO's economic assumptions that may seem optimistic, particularly in the context of the Trump Administration's trade war. This reports Reuters.

A worrying feature of this development is that net interest payments, which account for a sixth of total government spending, are expected to rise to 4% of GDP. However, despite these alarming figures, it is considered unlikely that the US will experience a serious debt crisis in the near future, which could lead to a massive withdrawal of investors from government bonds and the dollar.

Risks and uncertainties

In times of crisis, the Federal Reserve could potentially purchase large amounts of U.S. bonds to stabilize the market. However, the CBO also notes that an economic downturn cannot be ruled out. Such a downturn could reduce tax revenues and increase spending on social services, which would further strain fiscal conditions. Higher borrowing costs are already on the rise and could further worsen the US budget situation.

Another important point is the basis on which the CBO projections are based. They assume that the yield curve normalizes. A yield of 3.2% is currently expected for three-month government bonds and 3.9% for ten-year bonds. However, if interest rates remain at current levels, debt could rise to 125% of GDP by 2034. In this scenario, interest payments could represent up to 30% of revenue.

Long-term forecasts and past trends

The situation is not new. International Monetary Fund (IMF) data released through April 2025 paints a picture of U.S. national debt from 2001 to 2024, with forecasts through 2030. Details of these statistics can be found on Statista can be viewed. This information highlights the long-term upward trend in debt and the need to take fiscal measures to avert impending financial instability.

Overall, it shows that higher and longer interest rates could lead to a persistently high debt burden. The path to stabilizing U.S. public finances remains rocky, and policymakers will be required to take appropriate action.