What $4 trillion in debt from Trump's spending measure could mean for future generations
President Donald Trump's domestic spending measure will add more than $4 trillion to the national debt over 10 years, the nonpartisan Congressional Budget Office (CBO) said this week.
The fresh estimate ratcheted up a previous forecast due to an expected jump in interest rates, which would increase the government's debt-service payments, according to the CBO.
This projected uptick in federal debt complicates the government's finances but it also holds potentially severe consequences for the pocketbooks of everyday people, analysts from the University of Pennsylvania, Michigan State University and the Bipartisan Policy Center told ABC News.
Upward pressure on interest rates could hike borrowing costs for businesses and consumers, making it more expensive to take out a mortgage or pay off a credit card, the analysts said. Meanwhile, wage growth could slow, squeezing consumers tasked with paying off the higher loan rates.
"It was already an explosive debt path -- now we're piling on top of it," Kent Smetters, a professor at the University of Pennsylvania's Wharton School of Business who formerly worked at the CBO, told ABC News. "It's the future generations who will pay for this."
In June, the White House disputed concerns about the debt risk posed by Trump's spending measure. Rather, the Trump administration said, the measure will cut the nation's debt as a surge in economic growth fuels higher tax revenue.
"President Trump's plan doesn't just grow the economy, it actually reduces the debt burden on future generations -- something the D.C. establishment hasn't done in decades," the White House said in a statement.
The U.S. has run up nearly $37 trillion in debt. In 2023, the CBO said the federal debt would grow another $20 trillion by the end of 2033. That assessment arrived before Trump's spending measure, which is set to add trillions more to the debt, according to the CBO.
It's been more than 20 years since federal government's last budget surplus, which occurred in 2001. Every year since then, the U.S. has spent more money than it has brought in, deepening the nation's financial hole.
The ballooning federal debt is expected to raise interest rates as the government issues larger and larger amounts of Treasury bonds. As a result, creditors would likely demand higher yields amid a perception of increased risk that the U.S. would not repay.
"As the supply of those debts gets so big, lenders around the world in the U.S. and elsewhere will insist on higher interest rates," Charley Ballard, a professor of economics at Michigan State University, told ABC News.
Interest rates on government debt help set borrowing costs for everything from mortgages to auto loans to credit cards. If they rise, consumers could face higher loan expenses and greater risk of default, according to analysts.
Meanwhile, the upward pressure on interest rates is expected to drag on economic output and pull back inflation-adjusted wage growth, some analysts said.
The Penn Wharton Budget Model, a forecast affiliated with the University of Pennsylvania, predicts the average wage will end up 3.4% lower over 30 years as a result of Trump's spending measure, in part due to added debt.
"As you get more debt, ultimately somebody has to pay for it," Smetters said.
To be sure, academics and advocates have been raising alarm about the national debt for decades -- with no crisis to show for it.
As the government has piled on debt, demand for U.S. Treasury bonds has remained robust, owing to the country's unique position as the world's top economy and the issuer of the global reserve currency. That strong demand has kept interest rates relatively low.
Analysts who spoke to ABC News acknowledged the difficulty in predicting when severe effects may materialize but warned the current trajectory is unsustainable.
"I've been surprised that the world credit markets have such an enormous appetite for dollar debt," Ballard said. "I just can't believe that appetite is infinite."
In May, Moody's, a top ratings agency, cut the U.S. credit rating, dropping it one notch from the top rating of Aaa to a lower classification of Aa1.
Moody's credit reassessment came years after similar downgrades of U.S. debt at the two other major credit agencies: S&P in 2011 and Fitch in 2023.
"The credit rating agencies are saying this is a concern for investors. At some point, we'll have a crisis and people will look back and say, 'Why didn't we do something earlier?'" Shai Akabas, vice president of economic policy at the Bipartisan Policy Center, told ABC News.
