CBO chief warns it’s ‘probably not plausible’ that a strong economy alone can steady U.S. debt as 5%-6% growth is needed—more than Bessent’s 3% view

Congressional Budget Office Director Phillip Swagel said faster economic growth is unlikely to keep U.S. debt in check, even if GDP expands at more than double its current pace.

Gross debt is now $40 trillion, and publicly held debt is 100% of GDP.

Just keeping that ratio flat, let alone bringing it down, would require a massive, sustained boom.

For now, CBO see the debt-to-GDP ratio soaring to 120% by 2036.

During a Minneapolis Fed conference on Thursday, Swagel said stronger economic growth will help by bringing in more revenue for the federal government, but it’s not that simple.

Federal spending also boosts growth, which lifts wages that in turn affect outlays on Social Security benefits, he pointed out.

A robust economy also tends to send interest rates higher, which adds to debt interest costs.

“So growth will help, but it’s probably not plausible that growth alone will stabilize our fiscal trajectory,” Swagel added.

“So then we’re left with changes in revenues and changes in spending, and those are inherently political choices.” Minneapolis Fed President Neel Kashkari asked if AI can help supercharge economic growth, and he replied that CBO has detected an increase in total factor productivity, which measures the efficiency of labor, capital, and other inputs.

The CBO’s next batch of economic forecasts due early next year will incorporate its views on AI, Swagel said, adding that future growth will be stronger.

Still, the budget deficit is so deep that even the extra AI-powered growth won’t be enough, he warned.

Kashkari then asked how much faster growth would have to be in order to stabilize the debt.

Swagel cautioned against doing arithmetic on the fly but offered some back-of-the-envelope numbers.

Assuming interest rates of 4%-5%, he estimated that nominal GDP growth would have to reach 7%-8% and real GDP growth would have to hit 5%-6%.