• CBO Director Phillip Swagel said economic growth alone is unlikely to stabilize the federal debt-to-GDP ratio without changes to spending, revenues, or both.
  • Under CBO's baseline, debt held by the public is projected to reach 120% of GDP by 2036 and 175% by 2056; if interest rates rise more than expected, debt could hit 222% of GDP by 2056.
  • A fiscal adjustment averaging 0.2% of GDP in primary deficits would be needed to keep debt at its fiscal 2026 level of 101% of GDP, requiring $7.3 trillion less in cumulative primary deficits over 2026–2036.

Swagel's Stark Assessment

Congressional Budget Office Director Phillip Swagel is cautioning that robust economic growth, even if sustained, will not be enough to stabilize the U.S. debt burden. In a September 24 letter to Senate Budget Committee Ranking Member Jeff Merkley, Swagel underscored that without meaningful fiscal adjustments, the debt-to-GDP ratio will continue its upward climb.

The letter, which was reviewed by financial news outlets, compares CBO's current-law baseline with alternative scenarios. Under the baseline, debt held by the public stands at 101% of GDP in fiscal 2026 and is projected to rise to 120% by 2036 and 175% by 2056. If interest rates gradually rise to 1 percentage point above the baseline before any economic feedback, debt would reach 222% of GDP in 2056.

"Growth alone is unlikely to stabilize the debt trajectory," Swagel said, according to people familiar with the matter. "Without changes to spending, revenues, or both, the debt will continue to grow faster than the economy."

The Math of Stabilization

To keep debt at its fiscal 2026 share of GDP, CBO estimates that primary deficits—deficits excluding interest—would need to average just 0.2% of GDP over 2026–2056, compared with 2.1% in the baseline. That translates to $7.3 trillion less in cumulative primary deficits over the next decade, and total deficits would fall by $9.1 trillion once interest savings and economic effects are included.

These are conditional exercises, not predictions of legislative action. CBO does not specify which taxes or spending programs would change in the stabilization scenario, leaving the contentious policy choices to lawmakers.

Why Growth Isn't Enough

Growth helps by expanding the tax base and the denominator of the debt-to-GDP ratio, but persistent deficits add new debt, while interest costs compound the existing burden. In CBO's long-term baseline, annual nominal GDP growth averages 3.8%, while the average interest rate on publicly held federal debt averages 4%. Primary deficits also continue at an average of 2.1% of GDP. Together, these conditions push the debt ratio upward.

Swagel's February outlook illustrates the difficulty: the economic effects of the 2025 reconciliation law increase growth and revenues, but also increase interest rates. CBO estimates that the interest-cost effect dominates, so those macroeconomic changes slightly increase the deficit rather than reduce it.

Even technological optimism is baked in. CBO includes an average annual productivity-growth contribution of about 0.1 percentage point from generative AI, yet still projects real GDP growth of roughly 1.8% annually from 2027 onward and a rising debt burden. The warning is not that growth is irrelevant, but that plausible growth gains are insufficient on their own under the projected fiscal structure.

Market and Budget Implications

The higher-rate scenario produces approximately $1.5 trillion in additional total deficits during 2026–2036, according to CBO. More federal borrowing reduces resources available for private investment, lowers capital formation, and slows growth—feeding back into weaker revenues and higher debt.

Net interest outlays are projected to rise from $1.0 trillion in 2026 to $2.1 trillion in 2036, increasing from 3.3% to 4.6% of GDP. Spending on Social Security, Medicare, and interest grows faster than economic output.

Financial markets have taken notice. Recent reporting has focused on Treasury yields and the debt outlook, including a September 26 report explaining CBO's higher-rate scenario. The important distinction is that 222% of GDP is a stress scenario, not CBO's central forecast.

The September analysis also shows the reverse mechanism: stabilizing the debt ratio lowers projected interest rates, encourages private investment, and modestly increases growth. However, CBO cautions that the actual economic outcome would also depend on which fiscal policies lawmakers choose.

Political Resistance and Policy Choices

Three policy developments materially changed CBO's February baseline relative to its January 2025 outlook. The 2025 reconciliation law increases projected 2026–2035 deficits by $4.7 trillion, including macroeconomic and debt-service effects. Higher tariffs reduce projected deficits by approximately $3 trillion. Lower immigration increases projected deficits by approximately $0.5 trillion. These are separate policy contributions, not a complete reconciliation of every baseline revision.

The reconciliation law's deficit-increasing provisions include extensions of 2017 tax provisions and additional defense and homeland-security spending. Changes to Medicaid and the Supplemental Nutrition Assistance Program reduce projected deficits. Tariffs raise revenue but weigh on growth, while lower immigration slows labor-force growth.

The political disagreement is partly about whether stronger growth can substitute for fiscal adjustment. Treasury Secretary Scott Bessent has argued that growth reaching 3% could help the United States grow out of its debt problem, according to September reporting. Swagel's analysis underscores why that outcome cannot simply be assumed: growth, interest rates, and deficits interact.

Historical Context and Looming Pressures

CBO projects publicly held debt to surpass its previous high of 106% of GDP—reached in 1946—in 2030. Unlike the postwar benchmark, the current outlook features sustained large deficits even while unemployment is projected to remain below 5%. Swagel calls that combination historically unusual.

The deterioration is not solely a consequence of the latest legislation. The baseline also reflects continuing growth in Social Security, Medicare, and interest spending relative to output. The 2025 reconciliation law, tariffs, and immigration changes alter that preexisting trajectory.

Two connected developments are particularly useful. First, CBO's September analysis extends earlier interest-rate sensitivity work by including longer-run economic feedback. That explains why the estimated debt consequences are larger than in an exercise that changes interest costs alone. Second, AI productivity gains are already part of CBO's forecast, making the outlook relevant to the broader debate over whether a technological boom can materially relieve fiscal pressure. CBO's assumed gains help growth but do not stabilize debt.

The Road Ahead

In the short term, the central risk is sensitivity to financing conditions: higher rates increase interest expenses and borrowing needs. CBO's baseline projects a fiscal 2026 deficit of $1.9 trillion, or 5.8% of GDP, and a deficit of $3.1 trillion, or 6.7% of GDP, by 2036.

Over the longer term, the gap between the scenarios is substantial: debt reaches 175% of GDP in the baseline, 222% in the higher-rate scenario, or remains at 101% with sustained fiscal adjustment. These are not probabilities; they demonstrate how policy and financing conditions change the trajectory.

A final limitation matters for interpreting "latest": the September scenario analysis uses the February baseline, whose budget assumptions incorporate legislation passed by both houses of Congress through January 14, 2026. It is a recent analysis of an established benchmark—not a fully refreshed October forecast.

Correction: An earlier version of this article misstated the cumulative primary deficit reduction needed over 2026–2036. It is $7.3 trillion, not $7.1 trillion. The article has been updated.