The U.S. national debt may exceed $50.7 trillion by 2034 as rising spending and interest expenses outpace tax revenues and deficits are amplified by increased costs for Medicare and Social Security, according to a report published June 18 by the Congressional Budget Office.
The budget deficit is expected to be $1.9 trillion this year, up from a $1.6 trillion earlier forecast from Congress' nonpartisan bookkeeper. Over the next decade, the annual deficit is anticipated to jump to $2.9 trillion.
Five things to know:
1. Inflation: Overall prices, as measured by the personal consumption expenditures price index, will increase less in 2024 and 2025 than they did last year, according to the CBO. The rate of inflation is projected to be slightly lower in 2024 than it was in 2023 for three main reasons:
- Supply chains will have largely recovered from pandemic-induced problems
- Rising unemployment will put downward pressure on wage growth
- Higher long-term interest rates will put downward pressure on certain prices
2. Interest rates: In early 2025, the CBO expects the Federal Reserve will respond to slowing inflation and rising unemployment by lowering the federal funds rate, which affects interest rates throughout the economy.
3. Uninsured: The uninsured rate is estimated to increase to 8.9% by 2034. Last year, the county's uninsured rate hit a record-low of 7.2%. A preliminary survey published in June by the National Center for Health Statistics found the 2023 uninsured rate was 7.6%, or 25 million people. The CBO attributes the expected uninsured increase over the next decade to Medicaid redeterminations, the expiration of ACA premium subsidies after 2025 as well as the recent increase in immigration.
4. Wages: From 2024 to 2034, slowing demand for labor and declining inflation is anticipated to restrict the growth of nominal wages. The employment cost index for wages and salaries of workers in private industry is on track to grow by 4% in 2024, down from 4.3% in 2023. Wage growth may continue to slow through 2029 but remain above 2.7% — its annual average in the five years before the onset of the COVID-19 pandemic in early 2020.
5. Unemployment: The unemployment rate, which was 3.8% in the first quarter of 2024, is expected to rise steadily in the coming years as the growth of real economic output slows. The unemployment rate is expected to hit 4% by the end of 2025 and 4.5% in 2030, before declining slightly thereafter.