The Blubber

A new report from the Government Accountability Office (GAO) reinforces the Congressional Budget Office’s (CBO) ongoing warnings that the federal debt is heading down an unsustainable path. The GAO identifies key factors influencing this fiscal trend and urges Congress to create a comprehensive strategy to tackle the issue.

According to GAO’s long-term forecasts, public debt could more than double over the next 30 years — increasing from 102% of the nation’s gross domestic product (GDP) in fiscal year 2025 to 253% by 2055. These projections assume that current policies, including expiring tax provisions, remain in effect over the next decade and that economic relationships among budget categories remain relatively stable in the following two decades.

While GAO’s analysis draws on prior CBO data, its conclusions align with CBO’s more recent updates pointing to deep-rooted structural issues that are creating a widening gap between federal spending and revenue:

Rising Expenditures:
GAO emphasizes that the biggest drivers of future spending will be healthcare programs, Social Security, and net interest payments — all of which are expected to grow faster than the economy itself. By 2054, combined spending on healthcare and Social Security is projected to reach 14.7% of GDP, up from 10.7% in 2024. This growth is largely attributed to an aging population and escalating healthcare costs. Meanwhile, net interest expenses are projected to soar, hitting 3.2% of GDP by 2025 and nearly 9.0% by 2054 — ultimately making interest payments the largest budget category due to increasing debt and higher interest rates.

Insufficient Revenue:
In its outlook through 2034, GAO modifies CBO’s baseline to account for the likely continuation of tax cuts, such as those introduced by the Tax Cuts and Jobs Act (TCJA) that are set to expire at the end of 2025. Extending these provisions would reduce federal revenue and increase the deficit. Under these assumptions, GAO estimates revenues will average 16.5% of GDP from 2025 to 2034. From 2035 onward, GAO assumes revenues will remain flat at 17.4% of GDP — consistent with their 30-year historical average — through 2098.

In addition to these projections, the GAO underscores the need for Congress to adopt a long-term fiscal plan. The report supports the idea of establishing a fiscal commission to help guide such efforts, noting that lawmakers introduced six related bills in 2023 and 2024. GAO suggests that a well-designed commission could:

• Implement fiscal rules and targets to address spending-revenue imbalances;
• Explore alternatives to the current debt limit system;
• Find ways to shore up funding for Social Security and Medicare; and
• Identify broader opportunities for promoting fiscal sustainability.