President Donald Trump’s signature economic policy from his first term—the Tax Cuts and Jobs Act—is set to expire at the end of this year. Trump and top Senate Republicans have called for making the cuts permanent.
But some fiscal conservatives are pushing back. One Republican lawmaker requested that the Congressional Budget Office (CBO) provide an estimate on how extending the tax cuts would impact the national debt.
In a report released Friday, the CBO projected that if the Tax Cuts and Jobs Act were made permanent and no other changes to fiscal policy were made, public debt would soar to 214% of GDP by 2054.
If borrowing costs also rise by just 1 percentage point due to worsening fiscal conditions, the debt would reach 204% of GDP by 2047 and exceed 250% by 2054.
Currently, total U.S. debt stands at $36 trillion, with about $29 trillion held by the public. The cost of servicing that debt has already surpassed $1 trillion annually—exceeding even the Pentagon’s budget—further straining federal finances.
“Macroeconomic feedback effects would further increase interest rates and, therefore, lead to even worse fiscal outcomes,” warned the Peter G. Peterson Foundation. “Such findings demonstrate the sensitivity of the nation’s finances to borrowing costs.”
Even under the CBO’s baseline scenario—assuming the tax cuts are allowed to expire—U.S. public debt would still climb to 166% of GDP by 2054, up from 99% today. That would break historical records, surpassing levels seen after World War II.
A White House official told Fortune that the Trump administration’s supply-side reforms—including increased energy production, deregulation, and spending cuts—are expected to fuel economic growth and expand the tax base. According to the official, this would reduce inflation, prompting the Federal Reserve to lower interest rates and, in turn, ease borrowing costs.
The official also noted that the administration intends to generate additional revenue through tariffs. Trump’s tariffs on China during his first term, the official said, raised hundreds of billions of dollars without significantly affecting inflation or economic growth.
The CBO did not evaluate whether the projected debt levels would be sustainable. However, surpassing 200% of GDP would violate the debt threshold outlined by the Penn Wharton Budget Model.
In its October 2023 report titled “When Does Federal Debt Reach Unsustainable Levels?” the Penn Wharton Budget Model stated that U.S. debt held by the public cannot sustainably exceed 200% of GDP—even under favorable financial conditions.
“This 200 percent value is computed as an outer bound using various favorable assumptions,” the report said. “A more plausible value is closer to 175 percent, and, even then, it assumes that financial markets believe that the government will eventually implement an efficient closure rule. Once financial markets believe otherwise, financial markets can unravel at smaller debt-GDP ratios.”
The CBO’s projections come amid rising concerns about the growing national debt. Most recently, billionaire investor Ray Dalio warned of an impending U.S. debt crisis.
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