The projected amount of debt increases the risk that interest costs would be substantially greater than projected—even without a fiscal crisis—if interest rates were higher than those underlying CBO’s extended baseline projections. For example, if the average borrowing rate was 1 percentage point higher every year than the rate underlying the agency’s extended baseline projections, but all other aspects of the economy were unaffected, then the government’s net interest costs would amount to about 15 percent of GDP 30 years from now, which is 7 percentage points more than in CBO’s extended baseline projections. That amount is equal to about four-fifths of federal revenues projected for 2050. Moreover, under those circumstances, federal debt would be over 260 percent of GDP, which is about 70 percentage points higher than in the extended baseline projections. If interest rates jumped, investors could become concerned about the government’s fiscal position over the long term as they tried to determine whether the uptick in rates was temporary or signaled a long-run trend. Alternatively, a lower borrowing rate would result in smaller interest costs than those in CBO’s extended baseline projections.

High and rising debt (and the large deficits that result) might also constrain policymakers’ choices about fiscal policy going forward. As the federal government increased its borrowing, ever-larger cuts in primary deficits would be required to achieve particular targets for deficits or debt. As a result, policymakers could feel restrained from using deficit-financed fiscal policy to respond to unforeseen events or for other purposes (to promote economic activity or further other goals, for example), a situation that might not occur if debt and deficits were lower (or the increase was smaller). High debt could also undermine national security if it compromised the international geopolitical role of the United States or if policymakers felt constrained from increasing national security spending to prepare for or resolve an international crisis.