Meeting Fiscal Goals Under CBO’s January 2025 Baseline

Stabilizing debt over the next decade at its current share of the economy would require $9.0 trillion of deficit reduction relative to the Congressional Budget Office’s (CBO) January 2025 baseline. This is one of many possible fiscal goals policymakers could target to set the nation on a sustainable fiscal path.

Under current law, CBO projects debt held by the public will rise from 98 percent of Gross Domestic Product (GDP) at the end of Fiscal Year (FY) 2024 to 118 percent of GDP by 2035 – far exceeding the record 106 percent set just after World War II. There are several different fiscal goals policymakers could choose to curb this growth and/or put the debt on a downward sustainable path.

For example, Treasury Secretary Scott Bessent has suggested a 3 percent of GDP target for deficits. CBO projects deficits to be 5.5 percent of GDP at the end of FY 2029 and 5.8 percent of GDP by 2035. We estimate that under a reasonable savings path starting in 2025, achieving 3 percent of GDP deficits by the end of FY 2029 (the last year of the President’s term) relative to current law would require $3.6 trillion of savings over the next five years. Pushing this goal out to FY 2035 would require $7.5 trillion of savings by 2035.

Policymakers could instead target a specific level of debt by 2029 or 2035. For example, reducing debt to 100 percent of GDP by the end of 2029 would require $2.5 trillion of savings or $8.1 trillion by 2035.

Savings Needed to Meet Various Fiscal Goals

Sources: Congressional Budget Office and Committee for a Responsible Federal Budget.
Notes: Figures include interest. ^Balance figures are adjusted to exclude the effects of timing shifts. 
*Assumes modified savings path of the CRFB Fiscal Blueprint for Reducing Debt and Inflation.
 

More ambitious targets would require larger savings. Balancing the budget by FY 2035 would require $16.7 trillion of total savings and $2.7 trillion in the final year alone. Balancing the primary budget – so that revenue fully pays for all non-interest spending – would require $7.0 trillion of savings through 2035.

Importantly, CBO’s current law projections assume the expiration of the Tax Cuts and Jobs Act (TCJA). Extending the expiring provisions of the TCJA without further offsets would result in roughly $4 to $5 trillion of revenue loss through FY 2035 – depending on the policies extended – and debt would rise to 129 to 131 percent of GDP instead of 118 percent of GDP. That would make any of these goals significantly more difficult; for example, stabilizing the debt at its current level over the next decade would require around one-half more in savings if the expiring individual and estate provisions of the TCJA were extended.

There are plenty of ideas out there to reduce budget deficits and meet these goals – our Budget Offsets Bank has trillions of dollars of savings available.

Policymakers should set a responsible fiscal goal and use the various budgetary hurdles this year – like the budget resolution, debt ceiling, and expiration of TCJA – as opportunities to craft sustainable solutions that address long-term fiscal challenges.