President Trump's eventful first days in office have been marked by a flow of executive orders, media spats, drawn-out confirmation hearings on Capitol Hill, and the Mexican president's abrupt cancellation of a visit to Washington.
Buried in the events was a report from the Congressional Budget Office showing Trump has begun his first term with a higher debt-to-GDP ratio than any president since Harry Truman. Worse, the CBO expects the country's debt burden to grow, and fast.
The $14.2 trillion in debt at the end of 2016, which represents 77 percent of GDP, is projected to be $24.9 trillion by the end of 2027, or 89 percent of expected GDP, the CBO said in its assessment.
Recommended For You
The 50-year historical debt-to-GDP ratio is 40 percent. In 2007, it was about 37 percent.
The $10.7 trillion increase in debt over the next decade comes from steadily increasing annual deficits in the face of rising entitlement commitments.
Record deficit spending of $1.4 billion in 2009, at the height of the financial crisis, has come down substantially since. The 2016 spending deficit was $587 billion, or 3.2 percent of GDP. It is projected to drop in 2017 and 2018, but by 2019 deficits will begin to rise annually until they hit $1 trillion in 2023 and $1.4 trillion in 2027. The country's debt is the aggregate of annual deficit spending.
CBO is required to build its debt projections based on current tax law and spending obligations.
Beyond 2027, the country will continue to wrestle demographic strains and improvements in mortality. By 2035 debt is expected to surpass 106 percent of GDP, the all time high experienced in WWII.
By 2047, debt will be 145 percent of GDP, says the CBO.
Growth much lower than Trump's expectations
The most recent projects represent a slight increase from estimates released last August, and account for slightly reduced expectations in government revenues.
The country will contribute 17.8 percent of GDP in taxes in 2017, while spending outlays will be 20.7 percent.
Revenues from taxes will hover between 18.1 and 18.4 percent of GDP over the next decade. Meantime, spending will grow to 23.4 percent of GDP by 2027.
Social Security and Medicare obligations explain most of the widening spending gap.
Commitments to Social Security will account for 29 percent of the country's $2.6 trillion in new outlays over the next decade. Medicare will account for 22 percent, and rising interest rates, which will increase the cost of servicing the debt, will account for 19 percent of new spending.
All other functions of the government, from infrastructure, to defense, to education, will account for 30 percent of new outlays, or roughly same as meeting Social Security obligations to Baby Boomers.
The CBO says its baseline projections are not intended to be a forecast of what will happen in the future, but rather a neutral benchmark that policy makers can use to weigh the potential affects of policy decisions.
Throughout his campaign, Trump vowed not to cut Social Security benefits to assure the program's solvency, instead insisting GDP will grow as a result of more favorable tax, regulatory, and trade policies. Taxes on new revenue will generate the income necessary to fund Social Security, according to Trump's campaign position on the issue.
The CBO projects Social Security's trust fund will be exhausted by 2029, resulting in a 29 percent across-the-board cut in benefits for all beneficiaries starting in 2030.
Trump has pledged a minimum of 4 percent growth in GDP. In the CBO's report, GDP growth peaks at 1.9 percent in the next decade, a rate projected under existing tax and regulatory policies.
Obligations to retirees will handcuff Congress
By 2027, CBO expects there to be 67.2 million Social Security beneficiaries—58.8 million will be retirees.
In 2016, there were 50.2 million Social Security beneficiaries, including about 41 million retirees receiving benefits.
Retirees' average monthly benefit will grow from $1,361 in 2016 to almost $2,000 in 2027, according to CBO's projections.
Last year, $619 billion in Social Security benefits were paid to retirees. That will increase to $1.3 trillion by 2027.
By 2019, the Old Age and Survivors trust fund and the Disability Insurance trust fund will run a combined deficit of $24 billion.
That deficit will increase annually until it hits $366 billion by 2027.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
