From our Budget Breakdown series highlighting problems in fiscal policy to inform the 2025 tax and budget debate.
Two reports published within the last week by the non-partisan Congressional Budget Office (CBO) highlight the explosive growth of our national debt and the economic harm it is likely to cause.
On Thursday, CBO published its long-term budget outlook, which projects the federal budget out 30 years with the assumption that current laws remain unchanged. Under this scenario, the national debt as a percent of gross domestic product (GDP) would surpass the all-time high of 106% it reached at the end of World War 2 by the time President Trump leaves office. Between then and 2055, the debt would then grow another 50% relative to GDP.
These projections would be alarming enough on their own. But even more alarming was a special report CBO published the week before in response to an inquiry from Rep. David Schweikert (R-Ariz.), who co-chairs the Congressional Joint Economic Committee. Schweikert asked CBO to project what would happen if Republicans made the expiring provisions of the Tax Cuts and Jobs Act (TCJA) permanent without offsetting the cost, which President Trump has made his top political priority. CBO’s answer: debt would more than double relative to GDP within the next 30 years. The annual budget deficit would also grow to 12.3% of GDP, which is nearly twice today’s level and four times the level it was when President Trump took office in his first term.
Schweikert also asked CBO to model a scenario under which interest rates were higher than expected, which could very well happen given that 1) the Trump administration’s tariffs and other misguided economic policies are keeping inflation above the Federal Reserve’s target and 2) our country has never experienced debt or chronic deficits anywhere close to the levels currently projected. Under a scenario in which average interest rates are just one percentage point above current projections scenario, CBO projects debt would grow to more than 250% of GDP — a level so high that the agency’s models ceased to function.
Republicans have argued that they must extend the expiring TCJA provisions because they would boost economic growth. But CBO estimates that doing so would actually shrink the economy by nearly 2 percentage points over the 30-year window. And in the “higher interest rates” scenario, the damage would be roughly double (before CBO’s model crashes). CBO’s reports make clear that slowing the unsustainable rise of our national debt — not accelerating it with unfunded tax cuts — is the key to economic growth.
CBO projects the Social Security trust funds will be exhausted in just 9 years. If no action is taken before 2034, benefits will automatically be cut across the board by at least 21%.
More from PPI & The Center for Funding America’s Future
