Today, the Congressional Budget Office (CBO) released its March 2025 Long-Term Budget Outlook, which builds off its January 2025 ten-year projections to show that the federal budget is on an unsustainable path. The long-term outlook shows:
- Debt Will Surge Past Record Levels. Federal debt held by the public will rise from 100 percent of Gross Domestic Product (GDP) in Fiscal Year (FY) 2025 to 156 percent of GDP by 2055 – 50 percentage points above the prior record.
- Deficits Will Rise Even Higher. Annual deficits will grow from 6.2 percent of GDP in 2025 – already twice as high as they were as recently as 2016 – to 7.3 percent of GDP by 2055. This is the highest they’ve ever been outside of a crisis.
- Spending Will Continue to Outpace Revenue. Spending has already risen from 20.7 to 23.3 percent of GDP since 2016 and is projected to further increase to 26.6 percent of GDP by 2055. Revenue is projected to grow from 17.1 percent of GDP in 2025 to 18.2 percent in 2027 as the Tax Cuts and Jobs Act expires, then increase gradually to 19.3 percent of GDP in 2055. Historically, revenue has averaged 17.3 percent of GDP and spending 21.1 percent of GDP.
- Interest Costs Will Explode. Interest costs will reach a record 3.2 percent of GDP this year – exceeding the cost of defense and Medicare – and further grow to 5.4 percent of GDP by 2055. The average interest rate on debt will exceed the economic growth rate by 2045, sparking the beginning of a debt spiral.
- Social Security is Only Eight Years from Insolvency. The Social Security Old-Age and Survivors Insurance trust fund will run out of reserves by 2033 – when today’s youngest retirees turn 70 – leading to an immediate 24 percent benefit cut under the law. If combined with the disability insurance trust fund, the combined trust fund would be insolvent by 2034.
- Improvements from Last Year are Likely to be Swamped by Further Borrowing. Debt-to-GDP projections for 2054 are 12 percentage points lower than projected in last year’s extended baseline – due largely to lower projected interest spending as well as higher projected revenue. However, extending expiring tax cuts would add nearly 50 percent of GDP to debt.
High and rising debt and deficits would have many negative consequences for the budget and the economy including slower income growth, higher interest rates and interest payments on the national debt, increased geopolitical risks, undue burden on future generations, reduced fiscal space to respond to emergencies, and an increased risk of a fiscal crisis.
Debt Will Surge Past Record Levels
Under its current law extended baseline, CBO projects that federal debt held by the public will rise from 100 percent of GDP at the end of FY 2025 to a record 107 percent of GDP by 2029 and 156 percent of GDP by the end of 2055. Projected debt in 2055 will be nearly double the pre-pandemic level as a share of the economy and more than triple the 50-year historical average of 50 percent of GDP. In nominal dollars, debt will grow by $108 trillion, from $30 trillion at the end of this year to $138 trillion by the end of 2055.
Source: Committee for a Responsible Federal Budget
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