The US Congressional Budget Office (CBO) has projected the country’s federal debt will grow to more than double the GDP in 2051.

In its long-term budget outlook, the CBO said debt will be equivalent to 202% of GDP by 2051, from 102% this year. This, the office noted, will increase the risk of a fiscal crisis even though dangers appear low in the near term.

The CBO also said net interest payments on the debt are expected to remain relatively low for the next decade. But expects it to rise rapidly over the following 20 years.

“The risk of a fiscal crisis appears to be low in the short run despite the higher deficits and debt stemming from the pandemic. Nonetheless, the much higher debt over time would raise the risk of a fiscal crisis in the years ahead.”
US Congressional Budget Office

Additionally, the agency projects a 10-year Treasury yield, after inflation, at 2.6% in 2050. The nominal yield was at 1.54%, near the highest in more than a year, on 4^th March.

The CBO’s debt projections doesn’t reflect the $1.9 trillion stimulus plan currently working its way through Congress. Experts say the report will likely buttress the Republicans opposition to the relief plan. And could also concern some Democratic lawmakers who have supported the bill.

Earlier, Federal Reserve Chairman, Jerome Powell said the US economy still has a long way to go before the central bank considers tightening. He also stressed that the low-inflation world of the past several decades, is unlikely to change.

US economy will need support for ‘some time’- Powell

Yellen unveils $9bn to help low-income communities in US 2051

In another development, US Treasury Secretary, Janet Yellen has unveiled a new $9 billion initiative for lenders serving low-income communities.

This represents the expansion of the government’s assistance to small and minority-owned businesses affected by the pandemic.

The funds will be administered through the Emergency Capital Investment Program. And has set aside $2 billion for participants with less than $500 million in assets. Also, the fund will reserve another $2 billion for those with less than $2 billion in assets. The program will support loans, grants and forbearance.

The move is part of the Biden administration’s effort to decrease racial inequality and help underserved communities. And it is financed by the spending bill passed by Congress in December.

In a statement, Yellen said the new program will support “financial-services deserts”. She explained it as “places where it’s very difficult for people to get their hands on capital so they can”.

A Federal Reserve survey of minority-owned US small businesses in February reported much weaker financial conditions than the average. The survey found that 88% of the firms surveyed with fewer than 500 employees, still have sales below pre-pandemic levels.

Also, nearly one-third of those business said their chances of survival would be somewhat unlikely without further government relief.

A Treasury Department official who briefed reporters revealed that lenders won’t have to pay dividends or interest to the Treasury for the first two years. This is to encourage low-cost capital for the most distressed businesses in underserved communities.