Goldman Sachs analysts said in a note that they now project a debt-to-GDP ratio of 130% by 2034, a significant increase from their previous forecast of 97%.
This shift reflects a more challenging fiscal environment over the past five years, characterized by a persistent primary deficit—excluding interest costs—approximately 5% of GDP wider than historical norms during full employment periods.
The debt-to-GDP ratio has already increased by 19 percentage points to 98% and Goldman Sachs says it is on track to surpass its post-World War II peak.
They add that compounding the issue, interest rates on new Treasury debt have roughly doubled, exacerbating the trajectory of both the debt-to-GDP ratio and real interest expenses as a share of GDP.
Goldman Sachs’ updated projections consider long-term forecasts for average interest rates on government debt, nominal GDP growth, and primary deficits outside of recessions.
Their…
