U.S. Debt Could Hit 222% of GDP by 2056, CBO Warns

The 10-year Treasury yield hit 5.23% on Friday, its highest level since 2007, and the Congressional Budget Office now says a further 1-point rise in rates would push publicly held U.S. debt to 222% of GDP by 2056. That is more than double today's 101% ratio and 47 percentage points above the CBO's current baseline forecast.

The 30-year yield climbed to 5.49%, the highest since 2004. Both benchmarks have surged more than a full percentage point since just before the Iran war started, according to the source data.

The spike has already outrun the government's own projections. In its most recent long-term forecasts, issued in February, the CBO expected the 10-year yield to sit at 4.1% this year, 4.2% in 2027, 4.3% from 2028 to 2031 and 4.4% from 2032 to 2036. Markets have blown past those numbers.

Several forces are driving yields higher: oil prices up on the Middle East conflict, AI hyperscalers spending hundreds of billions of dollars a year, an economy running hot, and a national debt that now stands at $40 trillion.

The fiscal arithmetic is deteriorating fast. Annual interest expenses on the debt have already reached $1 trillion, while the budget deficit is on pace to hit $2 trillion this year. There is no sign of political willingness to rein either in.

The sudden spike in yields prompted Sen. Jeff Merkley, the ranking Democrat on the Senate Budget Committee, to request fresh numbers from the CBO. In a letter replying to the senator, CBO Director Phillip Swagel analyzed a scenario in which interest rates rise until they sit 1 percentage point above the baseline.

Before incorporating macroeconomic effects, the CBO estimated the primary deficit — which excludes net interest outlays — would be 0.4 percentage point larger by 2056 than under the baseline. The total deficit would be 4.9 percentage points larger, a gap that shows how much of the added burden comes from interest expenses alone.

Under that same scenario, the total deficit would balloon to 14% of GDP by 2056. That compares with 5.8% expected this fiscal year and a 3.8% average from 1976 to 2025.

Growth takes a hit too. As debt soars, the CBO projects GDP growth 0.1 percentage point below its baseline, because capital flows into Treasury bonds rather than more productive uses. That undercuts the hope that the U.S. can simply grow its way out of the debt. Treasury Secretary Scott Bessent has said growth of 3% would make that possible.

The CBO also cautioned that its numbers under this scenario would be even worse once effects on the broader economy are counted.

"The resulting increase in debt as a percentage of GDP increases interest rates on Treasury securities even further," Swagel wrote. "Thus, macroeconomic effects push interest rates above the initial boost that was built into the scenario."

For comparison, the CBO modeled an opposite — and, by its own description, fantastical — scenario in which the debt-to-GDP ratio stays flat at today's 101%.

In that case, the primary deficit would be 2 percentage points smaller than the CBO's baseline by 2056, the total deficit 5.6 percentage points smaller, and publicly held debt 74 percentage points smaller. GDP growth would run 0.05 percentage point above baseline, before counting additional spillover effects.

"The increased GDP growth encourages more investment, increasing the amount of capital available to workers," Swagel wrote. "That higher capital stock raises the marginal product of labor, encouraging more labor, which results in further GDP growth."

The message for markets and lawmakers is stark: every additional percentage point of yield compounds through the deficit, and the CBO's own math suggests rising rates feed on themselves — pushing borrowing costs above whatever shock started the cycle.