Signal US government debt near 120% of GDP would need three points of GDP in extra fiscal saving

Summary

MGI puts US government debt at about 120 percent of GDP. Combined with higher interest rates, this means a growing share of public spending will have to go to debt payments. Bond investors could add pressure by demanding higher market interest rates, which feed through into higher costs of capital for businesses. To bring budgets back into balance, the report estimates that the United States would need additional fiscal saving, or reduced borrowing, of around three percentage points of GDP, roughly equal to its primary deficits in recent years. It warns, however, that tightening too little raises the risk of a debt crisis or sustained inflation, while tightening too much could tip the economy into secular stagnation.