This week on Facing the Future we discussed the latest budget and economic projections from the Congressional Budget Office (CBO) with the agency’s director Dr. Phillip Swagel. He described the factors pushing the national debt into record territory and the fiscal fallout from the Supreme Court’s recent decision to invalidate some of President Trump’s tariffs.
Swagel did not lay out a rosy scenario, calling the nation’s fiscal trajectory “daunting.” According to CBO, annual deficits will rise from $1.9 trillion (5.8% of GDP) in 2026 to $3.1 trillion (6.7% of GDP) in 2036 assuming no changes in current law. This continues a relentless trend toward higher deficits, which have averaged 3.8% of GDP over the past 50 years.
Meanwhile, CBO projects that under current law debt held by the public will rise from 101% of GDP in 2026 to 120% of GDP in 2036, reaching its highest level since the end of World War II.
“The fiscal situation is challenging now and unsustainable in the future,” Swagel said, “but we don’t know exactly when we will reach a point when there’s a crisis or when market participants believe that we have to do something right away. That’s really the challenge.”
Swagel noted that large deficits are usually associated with a crisis. What’s unusual now is the presence of large deficits in the absence of a crisis. “The unemployment rate is relatively moderate,” he noted. “Interest rates have risen some from past years, but the interest rate profile in our projections is still relatively benign, and yet the deficit remains wide, and debt rises. That’s an indication that this is an unusual and unprecedented situation.”
Within a few days of the baseline’s release, CBO’s revenue projections were put in doubt by the Supreme Court’s decision invalidating a portion of President Trump’s tariff agenda. Swagel explained that, “Last year, the revenues from the tariffs that were affected by the Supreme Court ruling amounted to about $130 billion, and that’s roughly half of the revenue collected from all tariffs.”
Prior to the Court’s decision, CBO was projecting that President Trump’s tariffs would lower the deficit by $3 trillion over 10 years, including interest savings and economic feedback. Swagel said about half of that estimate was from provisions struck down by the Court, leaving future deficits that much higher in the absence of new tariffs or other offsets.
“We will analyze how the administration reacts to the Supreme Court ruling,” Swagel said. “There was an executive order already that put forward an alternative tariff, and then the president posted on social media that he’s adjusting that tariff rate from 10% to 15%, and there have been some other changes since then. So we will look at it, we’ll analyze it, and we will provide policymakers with information on the fiscal consequences, on the tariff revenues raised and the economic consequences, what the changes mean for families, for businesses, for the economy, and then the feedback into the budget from there.”
Even with the tariffs assumed in the baseline, Swagel estimated that it would require about $8 trillion of policy changes just to stabilize the debt-to-GDP ratio at its current elevated level over the next 10 years. “And then, of course, the same effort has to keep going,” he cautioned. “There’s lots of ways policymakers can do that. It can be done on the revenue side, or on the spending side, or some combination of changes that amount to $8 trillion.”
“By way of comparison,” he noted, “the 2025 Reconciliation Act that was enacted would be about half of that in size. I have no policy recommendations. That is not saying, therefore, get rid of that act. That is obviously not a policy recommendation from CBO. It’s just to give an order of magnitude.”
He did not hold out hope that the U.S. will be able to grow out of the debt problem with a stronger economy. “Stronger growth certainly helps reduce the deficit,” Swagel acknowledged. “The challenge is that even much stronger growth than we have in our baseline forecast over an extended period makes for an improvement in the deficit, but doesn’t take care of the problem by itself.”
He identified net interest, which is projected to double over the next 10 years, Social Security and healthcare costs, including Medicare, as the drivers of rising spending.
“There’s no policy recommendation from CBO,” Swagel said. A policymaker could look at this and say, spending is the problem, or a policymaker could look at it and say, I want the spending, I want more revenue. We hold elections, and different people have different views that could be addressed in lots of ways.”
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.
