Federal Budget Policy with an Aging Population and Persistently Low Interest Rates

Relative to the size of the economy, U.S. federal debt is larger now than at any time since the end of World War II. Under current policies, the debt is expected to climb from around 75 percent of the Gross Domestic Product today to over 120 percent by 2040, and keep growing after that. Debt is rising in part because of a major demographic shift as the baby boom generation retires. It is projected to occur even though interest rates on Treasury borrowing likely will be persistently lower than historic norms.