CBO warns only 5-6% real growth could curb soaring U.S. debt

Phillip Swagel, director of the Congressional Budget Office, told a Minneapolis Federal Reserve gathering that accelerating the economy alone is unlikely to restrain the United States’ mounting debt, now about $40 trillion with publicly held debt equal to 100 % of GDP. He projected the debt-to-GDP ratio could climb to 120 % by 2036 unless growth reaches roughly 7-8 % nominal or 5-6 % real, more than double the recent 2.2 % quarterly rate.

While faster growth would increase tax revenues, it would also lift federal outlays through higher wages and Social Security, and push interest rates higher, raising debt service costs. Swagel highlighted that AI-related gains in total factor productivity are being incorporated into next year’s forecasts, but even optimistic AI-driven growth would not offset the deep deficit. Treasury Secretary Scott Bessent has suggested a 3 % growth path could “grow our way out,” a figure far below the CBO’s back-of-the-envelope needs.

Other models, such as the Penn Wharton Budget Model, estimate 3.5-4 % annual growth over ten years would keep the debt ratio steady. Swagel warned that an abrupt rise in interest rates could trigger a feedback loop, further inflating deficits and debt.