CBO: Projections of Deficits and Debt Under Alternative Scenarios for the Budget and Interest Rates

The Congressional Budget Office (CBO)* analyzed the effects of alternative budget scenarios in which provisions of the 2017 tax act were extended and the average interest rate on federal debt increased.

Summary:

This letter responds to a request for an analysis of projected deficits and debt under alternative scenarios for the budget and interest rates. Specifically, Congressman Schweikert asked how CBO’s baseline projections of deficits and debt—which reflect the scheduled expiration of certain provisions of the 2017 tax act (Public Law 115-97) under current law—would change if all provisions of that act were extended permanently. Congressman Schweikert also asked how the projections would change further if interest rates were higher than expected.

In the extended baseline projections that CBO published in March 2024, primary deficits (which exclude net outlays for interest) average 2.2 percent of gross domestic product (GDP) over the 2024–2054 period and equal 2.2 percent of GDP in 2054. Total deficits average 6.7 percent of GDP over that period and reach 8.5 percent of GDP in 2054. Federal debt held by the public increases from 99 percent of GDP to 166 percent of GDP—exceeding any previously recorded level and on track to increase further.

CBO estimates that if provisions of the 2017 tax act were extended and there were no other changes to fiscal policy, debt held by the public would reach 214 percent of GDP in 2054, 47 percentage points higher than in the long-term baseline projections. If interest rates also increased each year until they were higher by 1 percentage point (before accounting for macroeconomic effects), debt held by the public would grow even larger, exceeding 250 percent of GDP in 2054.

Letter to Congressman Schweikert.

Related Publications:

• CBO’s Model for Estimating the Effects on New Investment of Deductions to Recover the Cost of Capital
  December 4, 2024
• How the Expiring Individual Income Tax Provisions in the 2017 Tax Act Affect CBO’s Economic Forecast
  December 4, 2024
• The Long-Term Budget Outlook Under Alternative Scenarios for the Economy and the Budget
  May 21, 2024
• Budgetary Outcomes Under Alternative Assumptions About Spending and Revenues
  May 8, 2024
• The Long-Term Budget Outlook: 2024 to 2054
  March 20, 2024

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• Established in 1974, The Congressional Budget Office (CBO) is a federal agency within the legislative branch of the United States government.  It is charged with providing  members of Congress  objective  analysis of budgeting and economic issues to support the congressional budget process. Each year, CBO economists and budget analysts produce dozens of reports and hundreds of cost estimates for proposed legislation.