(Kitco News) - Analysts and economists have issued warnings that U.S. government spending is unsustainable; however, the trend is not expected to change anytime soon as the Congressional Budget Office said that the U.S. is on track to increase its deficit by $19 trillion in the next three decades.
The increase in the deficit comes as the CBO sees slightly slower economic growth of 0.1% this year, rising to 2.5% next year. The CBO sees the U.S. economy growing by 1.8% between 2028 and 2033.
"Potential output grows much more slowly than it has over the past 30 years, partly because of slower productivity growth but mainly because of an ongoing, long-term slowdown in the growth of the labor force," the CBO said in the report.
The CBO's latest deficit forecast has increased by $3 trillion from its previous estimate in May.
Annual deficits are expected to average $2 trillion between 2024 and 2033. The U.S. deficit is expected to hit record level as a percentage of GDP in the next three decades.
"Debt held by the public is projected to rise in relation to the size of the economy each year, reaching 118 percent of GDP by 2033—which would be the highest level ever recorded. Debt would continue to grow beyond 2033 if current laws generally remained unchanged," the CBO said in the report.
The CBO added that the budget deficits are due as interest on government debt and Medicare costs outpace government revenues.
According to some reports, the latest projections could increase political tensions on Capitol Hill as President Joe Biden and House Republicans continue to discuss raising the nation's spending limit.
Republicans have said they refuse to raise the debt limit without cutting government spending. According to many economists, the current standstill has the potential to create a significant global financial crisis.
The U.S. government officially reached its debt limit last month and is using "extraordinary" measures to meet its debt obligations. It is expected the U.S. government could run out of money by July.
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While the latest report provides a grim outlook for the U.S. economy, many analysts have said that this should continue to support gold prices.
In a recent interview with Kitco News, Thorsten Polleit, chief economist at Degussa, said that he sees gold prices pushing to $2,200 an ounce this year as the Federal Reserve will be unable to raise interest rates high enough to tame inflation.
Polleit noted that in 2021 the government paid about $350 billion to service its debt when interest rates were below 1%.
"If interest rates went to 5% and you have to fund $31 trillion, you will end up paying $1.2 trillion in debt. The American defense budget is only around $800 billion. That is unsustainable," he said.
Polleit added that gold remains an attractive safe-haven asset as fiat currencies worldwide continue to lose their purchasing power because of growing debt levels.
