On Tuesday, June 18, the Congressional Budget Office projected that the federal debt would hit $50.7 trillion by 2034. That’s only 10 years from now. That year the federal debt will equal 122% of the United States’ annual economic output (GDP). That would far surpass the high set in the aftermath of World War II.

The annual deficit will swell to $1.9 trillion this fiscal year and keep growing until the overall national debt hits $50.7 trillion a decade from now, Congress’s bookkeeper said in its latest report. The group revised its forecast from four months ago, when it projected that the debt would reach $48.3 trillion in 2034, and 116% of GDP.

This is scary enough without including all the fiscal policies that are due to hit the fan in the next 12 months or so. Next year, vast portions of the tax code–the Trump tax cuts–are set to expire. Congress structured that legislation so that the cuts DID NOT get figured into the national debt. Now, however, Congress–and whoever the next President is–will either have to reauthorize them (putting them into the debt calculations) or allow them to expire forcing a steep tax hike on wealthy individuals and corporations. (Too early to worry about that causing a recession in 2025, but do put it on your list of macroeconomic worries.) And there’s also your old friend the debt ceiling. Congress suspended the debt limit in 2023, but that, too, will expire next year, setting up a showdown between the two parties over federal spending.

And Medicare and Social Security need to be topped up. So that means a tax increase or a benefit cut.

Yeah, I know all the arguments that the debt doesn’t count because we owe it to ourselves.

But as of December 2022, foreign individuals, banks, and governments held approximately 30% of the total U.S. publicly held federal debt, which amounted to around $7.4 trillion out of $24.4 trillion in total publicly held debt. (The rest of the Federal debt is held by government institutions themselves, such as the Social Security Trust fund.)

That 30% is down from a peak of 34% in 2015, but we’re still talking about a lot of money.

The U.S. government and ultimately the U.S. taxpayer has to pay those foreign (and domestic) debt holders to hole our debt. (The top foreign holders of U.S. Treasury securities as of December 2022 were Japan $1.1 trillion, China $0.9 trillion, and United Kingdom $0.7 trillion.) Around 50.3% ($3.7 trillion) of the foreign holdings were held by official governmental sources like central banks, while the remaining 49.7% ($3.6 trillion) were held by private foreign investors and entities. The interest paid to foreign holders of U.S. debt in 2022 was approximately $184.4 billion. Higher current interest rates make that total payout higher.

At the least this huge Federal debt will keep U.S. interest rates higher. That will slow U.S.economic growth. And the government’s huge borrowing needs will crowd some other potential borrowers out of the market.

I think it would be prudent to figure higher interest rates and slower economic growth (and lower stock market returns) into your long range portfolio planning.