The national debt will nearly double by 2051 if taxing and spending stay the same, CBO says

US capitol
The Senate side of the Capitol is seen in Washington, early Monday, Nov. 9, 2020.

  • A new report from the CBO forecasts the federal debt to nearly double to 202% of GDP by 2051.
  • The CBO sees the government’s budget deficit declining after the pandemic before rising again.
  • The outlook hinges on taxing and spending laws staying the same, the CBO said.
  • Visit the Business section of Insider for more stories.

The federal government’s debt pile is on track to nearly double over the next three decades, according to the nonpartisan Congressional Budget Office (CBO).

Government debt swelled over the past year as lawmakers passed stimulus bills aimed at helping Americans through the COVID-19 recession. The increased spending led federal debt to reach 100% of gross domestic product at the end of 2020.

Should current laws for taxing and spending stay the same, that share is estimated to reach 102% of GDP by the end of this year, the CBO said in its long-term outlook report. Federal debt would then reach a record-high 107% of GDP in 2031 and nearly double to 202% of GDP by 2051, the office added.

The federal budget deficit – the amount that government spending exceeds tax income – is projected to fall to 10.3% of GDP this year from 14.9%, still the second-highest level since 1945. While it will stay elevated, the shortfall will decline as as pandemic-related expenses fade, the CBO said. Deficits will total 5.7% of GDP in 2031 and soar to 13.3% by 2051, according to the report.

The report doesn’t account for the $1.9 trillion stimulus package currently making its way through the Senate. House Democrats approved the measure on Saturday, and President Joe Biden has indicated he aims to sign the bill before expanded unemployment benefits expire on March 14.

Officials including Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell have repeatedly sought to dispel fears that the government won’t be able to finance its own debt. Near-zero interest rates ensure that, at least for now, the government’s cost of borrowing remains relatively low.

Yet the recent jump in Treasury yields signals those rates could climb sooner than previously expected. After the bond market saw elevated volatility last week, investors continued dumping government bonds on Thursday, betting on new stimulus to fuel a swift recovery and stronger inflation. The Treasury market is now pulling forward expectations for a rate cut from after 2023 to sometime in 2022.

Higher rates, when coupled with surging debt, can place the government in a compromised position, the CBO said.

“A growing debt burden could increase the risk of a fiscal crisis and higher inflation as well as undermine confidence in the US dollar, making it more costly to finance public and private activity in international markets,” the office added.

The CBO’s report could give Republicans more firepower with which to slam Democrats’ stimulus proposal. Senate Democrats advanced the bill on Thursday in a party-line vote, starting a lengthy debate process that Republicans are set to use as a roadblock for the plan’s passage. Discussion will be limited to 20 hours, teeing up a final vote for the weekend after a marathon amendment process.

The gloomy debt projections also don’t account for the large-scale infrastructure plan Biden aims to pass. The president has already started talks with lawmakers about a multitrillion-dollar infrastructure push that would further boost economic growth coming out of the pandemic.

If it passes, the proposal stands to give the national economy a shot in the arm – and to further increase the country’s debt pile.

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Republicans see Democrats’ $15 minimum wage increase and counter with $10 instead

mitt romney tom cotton
Mitt Romney and Tom Cotton at a news conference in 2014.

To counter the Democrats’ proposal of raising the minimum wage to $15 an hour by 2025, two Republican senators introduced a bill on Tuesday that maintained the 2025 timeline, but would instead raise the minimum wage to $10 an hour by then.

The Raise the Wage Act of 2025, led by Sen. Bernie Sanders of Vermont, was included in the Democrats’ $1.9 trillion stimulus package that passed out of the House Budget Committee on Monday. Republicans oppose the stimulus package as too large in general, but a new bill by Sens. Tom Cotton of Arkansas and Mitt Romney of Utah signals bipartisan support for a minimum wage increase. 

Their Higher Wages for American Workers Act proposes to gradually raise the minimum wage to $10 an hour by 2025 with a mandatory E-Verify, which would ensure that all workers who would receive the higher wages are legal.

“American workers today compete against millions of illegal immigrants for too few jobs with wages that are too low – that’s unfair,” Cotton said in a statement. “Ending the black market for illegal labor will open up jobs for Americans. Raising the minimum wage will allow Americans filling those jobs to better support their families. Our bill does both.”

A summary of the bill said that raising the minimum wage to $15 an hour would “destroy 1.4 million jobs,” and said $10 an hour would be better for the labor market. Treasury Secretary Janet Yellen has previously said that raising the wage to $15 an hour would have minimal effects on the availability of jobs.

The government’s nonpartisan budgetkeeper, the Congressional Budget Office, has actually looked at both numbers and their potential effect on the labor market. A 2019 report found that raising the minimum wage to $10 an hour would cost 0.1 million jobs, while a recent report said $15 an hour could reduce employment by 1.4 million jobs

Other elements of Romney and Cotton’s bill include:

  • After the raise to $10, indexing the minimum wage to inflation every two years;
  • Creating a slower phase-in for small businesses with fewer than 20 employees;
  • Raising civil and criminal penalties on employers that hire unauthorized workers;
  • Providing $100 million annually in automatic funding for the E-Verify system.

Democratic Sen. Joe Manchin of West Virginia has said he would support an $11 an hour increase, while Sen. Kyrsten Sinema of Arizona has said a minimum-wage increase isn’t appropriate for reconciliation, the process Sanders wants to use for the raise to $15. 

Although President Joe Biden has reportedly expressed his own doubts on whether the $15 increase would survive in the final version of his stimulus package, he and other Democratic lawmakers have repeatedly expressed their support for doing it to lift millions of Americans out of poverty. 

“Raising the minimum wage is not just about economic justice – it is about racial justice,” Sanders said on Twitter last Wednesday. “Nearly half of Black and Latino workers in America make under $15 an hour. We must end starvation wages, and give 32 million Americans a raise by increasing the minimum wage to $15 an hour.”

Insider’s own polling shows a majority of Americans support raising the minimum wage to $15, as reported by Juliana Kaplan.

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Too many people are still falling for harmful myths about raising the minimum wage

fight for 15 minimum wage protest
Demonstrators participate in a protest outside of McDonald’s corporate headquarters on January 15, 2021 in Chicago, Illinois.

  • The Congressional Budget Office released a report last week on the impact of raising the minimum wage to $15 an hour. 
  • The report has been reduced to snappy headlines highlighting the projected price tag while ignoring the policy’s benefits. 
  • It’s concerning how many people are getting the facts wrong about raising the minimum wage. 
  • Jonathan Schleifer is the Executive Director of The Fairness Project, a non-partisan nonprofit focused on ballot initiative campaigns that have included minimum wage increases, Medicaid expansion, paid leave, and fair lending practices.
  • This is an opinion column. The thoughts expressed are those of the author. 
  • Visit the Business section of Insider for more stories.

As Congress moves forward with President Joe Biden’s highly anticipated American Rescue Plan, one aspect of the stimulus package is generating outsized debate: the minimum wage increase.

The latest fight has been over the Congressional Budget Office’s (CBO) report on the impact of raising the minimum wage to $15 per hour over the course of five years, as the plan proposes. This significant report has been reduced to snappy headlines highlighting the projected price tag, while critics of the wage hike have glossed over the tremendous impact of lifting nearly one million people out of poverty. Not only is taking action to end poverty a moral imperative, but the aforementioned costs are wildly overblown.

With the report taking center stage in the debate over raising wages, and anti-worker politicians weaponizing it to slow momentum for higher pay, it’s concerning that so many people are getting the facts in this debate wrong. After all, the minimum wage is not a new phenomenon, and states around the country have been increasing wages for years.

Myths about raising the minimum wage

First, the premise that increasing wages inherently leads to job cuts is an outdated myth. A survey released in 2019 that analyzed 139 state minimum wage increases over the last four decades found no impact on disemployment, and similar studies have made it increasingly clear that raising wages doesn’t decrease employment. It’s unclear from the report why the CBO relies so heavily on the assumption that higher wages necessarily lead to significant disemployment and why it plays such a central role in their model. In fact, without it, most of their cost argument falls apart.

Second, price increases and the impact they have on spending are overemphasized. One study showed that wage increases of 10% accounted for less than a 0.36% increase in prices. While on the high end, another study on the impact of raising the minimum wage at McDonald’s showed a 1.2% increase. Ask yourself: Would you even notice a 50 cent increase to your meal price? Would it really impact your spending? If you knew it meant lifting nearly a million people out of poverty, wouldn’t you consider that a worthwhile cost? I would.

Finally, if we are going to boost the economy, consumers need money to spend. Increasing the minimum wage would do just that, all while decreasing reliance on government programs like food stamps, increasing tax revenue for local governments, and saving businesses money by increasing productivity and decreasing turnover. Furthermore, women and people of color are disproportionately paid poverty wages and are those most impacted by the current economic downturn. It’s no secret that raising the minimum wage would go a long way toward decreasing inequality, whereas resistance to it only reinforces this gap. 

Not to mention, raising wages is wildly popular. Deep red states like Arkansas, Florida, and Missouri have passed minimum wage increases with more than 60% of the vote – and you just don’t win 60% of the vote on very many issues in this country anymore. When it comes to the minimum wage, the biggest gap isn’t between Republicans and Democrats; it’s between politicians who don’t want to raise the wage and the people they represent. 

Right now, Congress has the chance to improve the lives of more than a million Americans, and if that means we all pay a few more cents per burger, so be it.

Jonathan Schleifer is the Executive Director of The Fairness Project, a non-partisan nonprofit focused on ballot initiative campaigns that have included minimum wage increases, Medicaid expansion, paid leave, and fair lending practices. A lifelong activist, educator, and advocate, he is dedicated to enacting policy that addresses economic inequity.

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