CBO WARNS U.S. NEEDS 5–6% REAL GDP GROWTH TO STABILIZE DEBT

CBO DIRECTOR PHILLIP SWAGEL SAYS THE U.S. WOULD NEED 5–6% REAL GDP GROWTH AND 7–8% NOMINAL GROWTH TO STABILIZE ITS DEBT-TO-GDP RATIO, ASSUMING TREASURY BORROWING COSTS NEAR 4–5%.

WITH FEDERAL DEBT AROUND 100% OF GDP AND A STRUCTURAL DEFICIT OF 6%, SWAGEL WARNS THE CURRENT FISCAL TRAJECTORY IS UNSUSTAINABLE.

HE ALSO CAUTIONS THAT RISING INTEREST RATES COULD CREATE A DANGEROUS FEEDBACK LOOP, INCREASING DEFICITS, DEBT AND BORROWING COSTS.

SWAGEL SEES STRONGER AI-DRIVEN PRODUCTIVITY AS A POTENTIAL GROWTH BOOST, BUT SAYS GROWTH ALONE WON'T SOLVE THE DEFICIT PROBLEM. ...