Rumored Senate Reconciliation Instructions Would Double Debt Growth

Press reports indicate that Senate leadership may release a proposed concurrent budget resolution for Fiscal Year (FY) 2025 as early as today with potentially $5.8 trillion in net allowable deficit increases from reconciliation instructions. Based on the details as we understand them, we estimate that this would allow twice as much additional borrowing as the House budget and double projected debt growth over the next decade and beyond to 134 percent of Gross Domestic Product (GDP) by 2034 and 211 percent by 2055, compared to 117 and 156 percent, respectively, under CBO's current law baseline.

If the $5.8 trillion estimate is correct, it would not only be more than double the House budget's $2.8 trillion, but also more than three times larger than the American Rescue Plan – the largest deficit increase from reconciliation legislation in history – and nearly four times as large as the original Tax Cuts and Jobs Act.

The $5.8 trillion estimate is based on recent press reports that the Senate will include instructions to allow the Senate Finance Committee to increase deficits by $1.5 trillion in addition to using a current policy gimmick to hide roughly $3.8 trillion of tax cut extensions. It further assumes over $500 billion of new borrowing for immigration, defense, and energy based on the prior Senate budget resolution and $3 billion of deficit reduction instructions for spending cuts based on previous press reports. Although the budget would allow up to $5.8 trillion of borrowing, deficit-increasing instructions are ceilings and deficit-reduction instructions are floors and so total borrowing could be less.

Assuming reconciliation adds $5.8 trillion to primary deficits in the first decade while making the $3.8 trillion of tax cuts extensions (but no other policies) permanent, debt would rise more than twice as fast as under current law. Instead of growing from 100 percent of GDP at the end of this year to 117 percent by 2034 and 156 percent by 2055 under CBO's baseline, we project debt would grow to 134 percent of GDP by 2034 and 211 percent by 2055. Said another way, debt will grow more than 50 percent under current law but could more than double by 2055.

If the full $5.8 trillion of borrowing were ultimately made permanent, debt would grow even more rapidly. If these reports are true, this would set a terrible precedent and double the growth of debt as a share of GDP over the next decade. Policymakers should reject these fiscally irresponsible efforts.