This week on Facing the Future, Phillip Swagel, Director of the nonpartisan Congressional Budget Office (CBO) gave us a rundown on CBO’s 2025 Long-Term Budget Outlook, which was released last week. This annual report extends CBO’s budget projections and economic forecasts over the next 30 years under the assumption that current spending and tax laws remain generally unchanged. Concord Coalition Executive Director Carolyn Bourdeaux joined the conversation.
By 2055, CBO projects annual budget deficits would reach 7.3 percent of the gross domestic product (GDP), nearly doubling the 3.9 percent average over the past 30 years. Driven by these deficits, debt held by the public would rise from the already near-record level of 100 percent of GDP today to 156 percent in 2055. Debt would rise further in 2055 to over 200 percent of GDP if expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA) were extended without offsetting the lost revenue – an issue that is front and center in this year’s budget debate.
Swagel cautioned that long-term budget projections are very uncertain, but “even with that uncertainty, it’s clear that our fiscal situation is unsustainable. We have rising debt and we have very high deficits compared to our historical average. Those deficits persist and that’s what drives the rising debt.”
“That fiscal situation,” Swagel continued, “in turn feeds back to negatively affect the economy and there’s a sense in which the fiscal trajectory over time will undermine some of the foundations of our economy. It could be in a slow way, the sort of undermining and sapping our growth. Eventually, there could be something more dramatic. We don’t predict a crisis. We don’t know when it will happen at any one point, but the slow undermining of the economy by our fiscal trajectory means an increasing risk of that crisis over time.”
Swagel pointed out, “there’s a gap between revenue and spending, and that persists and it widens over time. So we have a structural budget deficit of at least 6 percent of GDP that gets wider. One person might say, ‘We need more revenue’, another person might say, ‘we need lower spending’, and someone, of course, could say ‘we need some mix of both,’ CBO has no view on what’s the right thing to do. We just have a view that it’s not sustainable, and something must be done.”
Looking out over the next 30 years, Swagel said, “On the spending side there’s basically three things happening. One is rising interest payments. We have more debt and interest rates are higher than they were in the past, so our interest obligations are rising. Number two is Social Security. The aging of our population means that outlays for Social Security are rising and that’s a story for the next 8 to 10 years or so. The dollars will continue to go up, but as a share of GDP Social Security will go up and kind of plateau. Continuing on[are] rising healthcare expenditures. That’s both the aging of the population, and that costs for healthcare rise more than growth of the overall economy.”
On the revenue side, Swagel noted that CBO’s baseline projections assume current law, which includes the expiration of several provisions of the TCJA. “That’s not our choice,” Swagel explained. “We’re not saying, ‘oh, this is what we, CBO, think we should do.’ That’s by law. And we’re an agency of rule followers. We’re following the law, and Congress is now considering what to do, whether to extend some or all, or make other changes to the expiring tax provisions.”
In a March 21, 2025 letter to Rep. David Schweikert (R-AZ), CBO estimated that extending all of the expiring tax cuts of the TCJA without offsets would increase debt held by the public to 214 percent of GDP in 2054.
Swagel discussed the trade-offs of extending the tax cuts. “Extending the provisions would improve incentives in some ways; the lower personal tax rates would improve labor supply incentives. They would also reduce revenue on net and lead to more crowding out that has a negative effect on the economy and leads to larger deficits. What the letter spells out is those economic and budget consequences.”
“That scenario was set by Mr. Schweikert,” Swagel noted. He said, ‘show me the numbers in this particular scenario,’ and we answered the question that we were asked. But it just shows you that there’s a certain turbocharger aspect to it. Over time the deficits are so large there is this feed back to interest payments, which feeds back to deficits, so the debt numbers can go up quickly over time.”
Hear more on Facing the Future. Concord Coalition Senior Advisor Bob Bixby hosts the program each week on WKXL in Concord N.H., and it is also available via podcast. Join us as The Concord Coalition team discusses issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.