CBO Director warns economic growth alone cannot stabilize U.S. debt

Congressional Budget Office (CBO) Director Phillip Swagel stated that economic growth alone is unlikely to stabilize the United States' debt trajectory. Speaking at a Minneapolis Fed conference, Swagel provided rough estimates suggesting that if interest rates remain between 4% and 5%, real GDP growth would need to reach approximately 5% to 6% to maintain the current debt-to-GDP ratio. This would require nominal GDP growth of roughly 7% to 8%, significantly higher than the 2.2% real GDP growth recorded in the second quarter.

Swagel noted that while faster growth increases federal revenue, it can also trigger higher spending pressures and increased interest costs if a stronger expansion pushes rates upward. He emphasized that because growth alone is insufficient, stabilizing the fiscal trajectory will ultimately require “changes in revenues and changes in spending, and those are inherently political choices.”

The CBO’s baseline projections indicate that federal debt held by the public will rise from 101% of GDP in 2026 to 120% by 2036. The agency also forecasts a $1.9 trillion federal deficit for fiscal year 2026, which is expected to widen to $3.1 trillion by 2036.