Interest on National Debt Could Threaten U.S. Economic Stability

• The Congressional Budget Office (CBO) director, Phillip Swagel, cautioned House lawmakers about the growing national debt and the potential existential threat it poses to the U.S. economy.
• The CBO's semi-annual report indicated that the U.S. yearly budget deficit is expected to increase by an estimated US$1.0Trn over the next decade, reaching US$2.6Trn in 2034. Net interest costs are predicted to surpass non-defense discretionary spending by 2024, climbing to 3.9% of GDP in 10 years.
• Swagel attributed the rising national debt to factors such as high interest rates, an ageing population, and increased federal healthcare costs. The projected debt is set to reach a record 116.0% of GDP by the end of 2034, potentially impacting social security benefits.
• Republicans on the committee welcomed findings indicating that the Fiscal Responsibility Act of 2023 helped marginally reduce the deficit. The bipartisan bill, negotiated by former GOP House Speaker Kevin McCarthy, linked raising the debt ceiling with federal spending caps.
• Democrats, like Dan Kildee from Michigan, emphasised the need for changes to the tax code to generate more revenue and criticised previous tax cuts. Swagel highlighted the CBO report's key finding that increased immigration could positively impact the U.S. economy, contributing to GDP growth and additional tax revenue over the next decade.

(Source: CNBC)