Total U.S. Debt as % of GDP Projected to Surpass 100% By 2025
The Congressional Budget Office (CBO) projects that Federal debt held by the public, measured as a percentage of national GDP, will rise above 100% by 2025. Debt held by the public was 97% of GDP at the end of fiscal year 2023.
The federal government regularly issues debt to fund operational expenses and meet legal obligations, including Social Security benefits and Medicare payments. A significant and growing expense has been the interest payments on this debt, including Treasury bonds and notes. Slowing economic growth can reduce tax revenue from individuals and corporations as incomes decline and tax receipts diminish.
The debt-to-GDP ratio is an economic metric that assesses a country’s government debt relative to its gross domestic product (GDP). It is calculated by dividing a country’s total government debt by its GDP, and can be indicative of debt level sustainability.
After peaking at over 100% in 1945 and 1946, the debt-to-GDP ratio gradually decreased over the following three decades, reaching approximately 25% by 1975. The United States successfully reduced its post-World War II debt ratio through a combination of a balanced primary budget and economic growth that exceeded the interest rate on the debt.
- Tony Winkels is Managing Partner and Wealth Advisor at Fortis Wealth Management
