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

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.