Faced with an ever-mounting national debt, UCF economist Sean Snaith welcomes “dramatic changes” to federal spending.
But he’s skeptical about the incoming administration’s Department of Government Efficiency, or “DOGE,” to usher in needed reforms, Snaith writes in his latest quarterly U.S. economic forecast, out this morning.
“I suspect it will turn into a Beltway version of dodgeball, with the bureaucracy and its supporters frantically running around, trying to avoid getting hit by the ‘DOGE ball,’” he says. “Just like in any elementary school PE class, there’ll be lots of shouting and chaos. But in the end, most of the systems and spending will remain intact.”
Ultimately, the rapidly rising national debt—now approaching $36.2 trillion—and the increasing burden of servicing that debt add to the air of uncertainty surrounding the U.S. economy’s outlook, Snaith says.
“Every trillion dollars in debt service is money that can’t be committed to infrastructure, helping the impoverished, healthcare for seniors or national defense—something has to change,” he says.
Additional highlights from Snaith’s four-year quarterly U.S. economic forecast are:
- The labor market is cooling. Payroll job growth of 2.3% in 2023 is decelerating steadily starting at 1.6% in 2024, to 1.0% in 2025 and just 0.1% in 2026 before stopping in 2027.
- Despite resistance to the effects of the Fed tightening thus far, the headline unemployment rate (U-3) is expected to gradually rise to 4.5% in 2027. The resiliency of the labor market played a large role thus far in keeping a recession at bay.
- High energy prices, food costs and housing costs steadily eroded consumers’ purchasing power. Recently, wage growth has surpassed inflation to stem households’ budgetary bleeding.
- Core consumer price inflation will continue its slow decline. By the end of 2026, headline inflation will be close to the Fed’s target level of 2%, but the Fed has already started to cut interest rates. If progress stalls, the Fed may have to pause cuts in 2025.
- Real consumption spending eased to 2.5% in 2023 due to falling real wages. Spending ticked up to 2.7% in 2024 and will continue to do so, hitting 3.0% in 2025. Growth will slow to 2.5% in 2026 and 2.4% in 2027.
- Real GDP growth surged to 5.8% in 2021. It eased to 2.5% in 2022, before bumping to 2.9% in 2023, and it will remain at 2.8% for 2024. Growth will slow to 2.7% in 2025. From there, real GDP growth will drift downward hitting 1.8% in 2027.
- High prices combined with 7%-plus mortgage rates eroded housing demand. However, persistently low inventories will support the sector. Housing starts declined from 1.6 million in 2022 to 1.42 million in 2023 and will ease, reaching 1.36 million in 2024. But as interest rates decline, starts will creep up reaching 1.44 million in 2027.
Sean Snaith, Ph.D., is the director of UCF’s Institute for Economic Forecasting and a nationally recognized economist in the field of economics, forecasting, analysis and market sizing. He has been recognized by Bloomberg News as one of the country’s most accurate economic forecasters and has served as a consultant for both local governments and multi-national corporations. Before joining UCF’s College of Business, Snaith held faculty positions at Pennsylvania State University, American University in Cairo, the University of North Dakota and the University of the Pacific. More of Snaith’s work is available here.
