CBO Director Says 5%-6% Real Growth May Be Needed to Stabilize Debt

Congressional Budget Office Director Phillip Swagel said stabilizing the U.S. debt trajectory through economic growth alone is unlikely, estimating that real GDP growth would need to reach roughly 5%-6% if interest rates remain between 4% and 5%.

Swagel made the comments during a scheduled conversation with Minneapolis Fed President Neel Kashkari on Oct. 8. The discussion was scheduled for 10:40-11:20 a.m. ET (14:40-15:20 UTC).

Under those interest-rate conditions, Swagel estimated that nominal GDP growth would need to reach about 7%-8%. He described the figures as rough, back-of-the-envelope calculations rather than formal CBO projections.

The estimate is well above the U.S. economy’s 2.2% annualized real GDP growth in the second quarter, which covered April through June. Real GDP growth measures output after adjusting for price changes, while nominal growth also includes inflation.

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

He said faster growth could increase federal revenue but also create higher spending pressures and interest costs if stronger expansion pushed interest rates higher. “So then we’re left with changes in revenues and changes in spending, and those are inherently political choices,” Swagel said.

CBO’s baseline projects that federal debt held by the public will rise from 101% of GDP in 2026 to 120% in 2036. The agency projects a $1.9 trillion federal deficit in fiscal 2026, widening to $3.1 trillion in 2036.

CBO’s baseline assumes the 10-year Treasury yield will average 4.3% from 2026 through 2036. In a scenario with interest rates 150 basis points higher, the average 10-year Treasury yield rises to 5.8%, while debt reaches 133.1% of GDP in 2036.

CBO’s projections show debt continuing to rise even as the economy expands, leaving changes to federal revenue and spending as the remaining policy choices highlighted by Swagel.