Will the US federal debt-to-GDP ratio exceed 140% before the end of 2035?

The Fiscal Reckoning: When Will US Debt Reach 140% of GDP?

The United States faces a long-term fiscal challenge of historic proportions. The Congressional Budget Office projects that federal debt held by the public will reach approximately 118% of GDP by 2035 under current law—already a postwar high. This prediction tests whether accelerating cost pressures push debt even further, to 140% of GDP, forcing a reckoning on taxes, spending, or monetary policy before 2036.

The CBO Baseline: A Conservative Starting Point

The Congressional Budget Office's baseline projection assumes no major policy changes beyond those already enacted. This estimate already reflects concerning trends: rising mandatory spending for Social Security and Medicare, expanding net interest payments on existing debt, and revenue bases that grow more slowly than spending. Even this conservative projection shows debt approaching levels not seen since the immediate post-World War II era, when demobilization and economic growth allowed debt-to-GDP ratios to fall rapidly. Today's dynamics offer no such automatic adjustment mechanism.

The Entitlement Spending Time Bomb

Social Security and Medicare represent the largest and fastest-growing components of federal spending, collectively accounting for over 40% of budget outlays. As the Baby Boomer generation enters full retirement and lifespans continue extending, the worker-to-beneficiary ratio deteriorates mathematically. By 2035, there will be fewer workers supporting each retiree, automatically increasing the fiscal pressure unless benefits are reduced or revenue sources expanded. The Congressional Budget Office's baseline assumes no policy changes to these programs, but demographics remain inexorable—this spending will accelerate regardless of political preferences.

Interest Payments: The Vicious Cycle

A particularly insidious dynamic accelerates debt accumulation: rising interest rates increase the cost of servicing existing debt, which increases deficits, which requires issuing more debt, which can push interest rates higher still. In 2024, net interest payments exceeded $600 billion annually. By 2035, under CBO projections, this figure could reach $900 billion to $1.1 trillion, depending on interest rate assumptions. If interest rates remain elevated (as many economists expect given demographic factors and potential inflation), interest payments become the fastest-growing budget item, crowding out discretionary spending and demanding either spending cuts elsewhere or new revenue sources.

The Tax Revenue Challenge

Federal revenues fluctuate with economic conditions and tax policy. Reaching 140% of GDP by 2035 requires that revenues remain inadequate to cover the combination of mandatory spending, interest, and defense spending. Current federal revenues hover around 17-18% of GDP. To stabilize debt at 140% of GDP, federal revenues would need to exceed 22-23% of GDP indefinitely. This suggests that either (a) the US embraces substantially higher tax rates, or (b) deficits persist and debt continues rising. The 73% 'Yes' vote reflects skepticism that either outcome will occur voluntarily.

Recession and Economic Shocks

The CBO baseline assumes relatively stable economic growth averaging around 2% annually. Any recession during the 2025-2035 period would automatically worsen the debt-to-GDP ratio, as economic growth falls while mandatory spending (unemployment benefits, Medicaid) rises. The prediction to 140% assumes that a significant recession occurs during this timeframe—a reasonable assumption given that the US averages a recession roughly every 5-8 years. A major financial crisis (comparable to 2008-2009) could push the ratio well beyond 140% before self-correcting through growth.

Political Gridlock and Procrastination

The US political system has repeatedly delayed fiscal adjustments that economists recommend. The likely scenario is that policymakers continue extending tax cuts (allowing revenues to fall), fail to meaningfully reform entitlements, and allow military and discretionary spending to grow nominally. This pattern has held for 20+ years and shows no signs of changing, even as the fiscal math becomes more acute. Political economy dynamics almost guarantee continued deficits, making 140% debt-to-GDP increasingly likely.

Alternative Scenarios and Risks

The 17% 'No' votes reflect belief in alternative scenarios: (a) growth significantly outpaces baseline assumptions, naturally reducing debt ratios; (b) policymakers enact comprehensive fiscal reform before 2035, combining spending restraint with revenue increases; (c) inflation erodes real debt value (though this requires accepting higher prices and reduced living standards). While possible, these outcomes require political consensus and economic luck that recent history suggests is unlikely.

Conclusion: The Fiscal Trajectory is Unsustainable

The 73% 'Yes' vote reflects the mathematical reality embedded in current law and demographic trends. Reaching 140% debt-to-GDP by 2035 requires no unusual policy mishaps—simply the continuation of existing patterns. The structural imbalance between revenues and mandatory spending, combined with demographic headwinds and compounding interest costs, creates a fiscal trajectory that accelerates systematically toward this outcome. Without major policy shifts in the next 1-2 years, reaching 140% becomes not a question of 'if' but 'when,' and 2035 appears increasingly likely as the timeline.