Alan J. Auerbach and William Gale

We examine the federal fiscal outlook in light of the most recent Congressional Budget Office (CBO) projections. While the CBO projects that the ratio of federal debt to GDP will rise from 99% currently to 175% in 2056 under current law, we show that under current-policy adjustments (including extending the temporary tax provisions of the 2025 One Big Beautiful Bill Act and maintaining government services), debt would rise to 211% by 2056. Under either projection, debt would continue to rise relative to the economy in subsequent years. Net interest payments rise to exceed either Social Security or Medicare outlays by 2047. Under current-law projections, the current debt-to-GDP ratio could be sustained in 2056 with immediate and permanent spending cuts or tax increases equaling 2.33% of GDP—equivalent to a 27% increase in income tax revenues or a 20% cut in spending other than Social Security, Medicare, and interest payments—or with larger changes enacted later. (Under current-policy projections, the required reductions are substantially larger.) How quickly actions are needed will depend on many factors, including the path of interest rates.