(The Center Square) – A quarter of every dollar U.S. taxpayers send to Washington is projected to go to interest costs by 2051 without changes to federal spending and taxation, according to a new report from a Congressional watchdog.
The U.S. Government Accountability Office report on the nation’s fiscal health found that the federal government’s net interest spending has taken up a relatively small share of total federal funding and the nation’s gross domestic product, a measure of economic output. That is expected to change as interest rates rise and federal spending grows.
“In our simulation, net interest spending would increase steadily over the next 30 years as a share of GDP, total federal spending and revenue,” according to the GAO report.
Over the last two decades, average net interest spending was 1.5% as a share of GDP. In the GAO simulation, net interest spending grows from 1.9% of GDP in 2022 to 8.4% of GDP in 2051. It reaches 24.6% of GDP in 2096.
In 2022, net interest spending was $475 billion. It is projected to exceed $1 trillion in 2029. By 2051, net interest spending is projected to reach $6.6 trillion, according to the report.
In fiscal year 2022, 92% of federal spending went to programs and 8% went to net interest costs. Without changes, interest costs would account for 26% of total spending in fiscal year 2051 and 48% in fiscal year 2096, according to the GAO report.
In the GAO simulation, net interest spending also increases in relation to federal revenue. In the simulation, net interest spending grows from about 9.7% of revenue in 2022 to 48.4% of revenue in 2051, 100% by 2078 and hits 141.4% of revenue in 2096.
The GAO report noted that significant changes would be needed to change the course of that debt growth.
“To achieve a 100% debt-to-GDP ratio at the end of 30 years (2022 to 2051), Congress would need to increase projected revenues by 23.2%, decrease projected program spending by 18.6% annually, or perform a combination of the two,” according to the report.