Introduction
The Congressional Budget Office’s (CBO) 2025–2035 U.S. Budget and Economic Outlook presents a sobering forecast of the United States’ fiscal trajectory. With federal debt projected to rise from 98% of GDP in 2024 to 118% by 2035, and annual deficits reaching $2.7 trillion, the report underscores the pressing need for policy interventions to ensure long-term economic stability .
The CBO’s projections are grounded in current law, assuming no changes to existing tax and spending policies. This approach highlights the structural imbalances in the federal budget, driven by mandatory spending programs like Social Security and Medicare, and escalating interest payments on the national debt.
“The fiscal path is unsustainable under current policies, necessitating significant reforms to avert economic repercussions,” notes Maya MacGuineas, President of the Committee for a Responsible Federal Budget .
This article delves into the legal frameworks, historical contexts, current proceedings, divergent viewpoints, comparable cases, and policy implications surrounding the CBO’s outlook, aiming to provide a balanced and scholarly analysis of the nation’s fiscal future.
Legal and Historical Background
Constitutional and Statutory Frameworks
The U.S. Constitution grants Congress the power to tax and spend for the general welfare (Article I, Section 8). The Congressional Budget and Impoundment Control Act of 1974 established the modern budget process, creating the CBO to provide nonpartisan analyses .
- Social Security Act of 1935: Established the Social Security program, providing retirement and disability benefits.
- Medicare Act of 1965: Created Medicare to offer health insurance to individuals aged 65 and older.
These programs are entitlements, meaning expenditures are determined by eligibility criteria rather than annual appropriations, leading to automatic increases in spending as the eligible population grows .
Historical Context
Historically, federal debt levels have fluctuated, peaking during wartime and receding during periods of economic growth. Post-World War II, debt held by the public reached 106% of GDP but declined to around 25% by the 1970s. However, recent decades have seen a resurgence in debt levels due to tax cuts, increased spending, and economic downturns .
The aging population and rising healthcare costs have exacerbated fiscal pressures, with mandatory spending projected to consume an increasing share of the federal budget. By 2035, mandatory spending and net interest are expected to account for 78% of total federal outlays .
“The demographic shift towards an older population is a primary driver of escalating entitlement spending,” observes Dr. Alice Rivlin, former Director of the CBO .
Case Status and Legal Proceedings
While the CBO’s report is not a legal proceeding, it significantly influences legislative debates and policymaking. The projections serve as a baseline for budget resolutions and inform discussions on fiscal reforms.
Currently, Congress faces decisions on extending the 2017 Tax Cuts and Jobs Act provisions, set to expire in 2025. Extending these cuts without offsetting measures could add over $4 trillion to the deficit over the next decade .
Additionally, proposals to reform entitlement programs are under consideration, including raising the retirement age, modifying benefit formulas, and introducing means-testing for Medicare. These proposals aim to curb spending growth but face political resistance.
“Reforming entitlement programs is politically challenging but fiscally necessary to ensure long-term sustainability,” asserts Dr. Douglas Holtz-Eakin, former CBO Director .
Viewpoints and Commentary
Progressive / Liberal Perspectives
Progressive policymakers and organizations emphasize the importance of preserving and strengthening social safety nets. They argue that austerity measures disproportionately affect vulnerable populations and advocate for increased revenues through progressive taxation.
“We must protect Social Security and Medicare from cuts that would harm seniors and low-income individuals,” states Senator Elizabeth Warren (D-MA) .
- Implementing higher taxes on the wealthy and corporations.
- Closing tax loopholes and eliminating preferential rates for capital gains.
- Introducing a financial transactions tax to curb speculative trading and generate revenue.
These approaches aim to address income inequality and fund essential programs without reducing benefits.
Conservative / Right-Leaning Perspectives
Conservatives prioritize fiscal discipline and advocate for reducing government spending to address deficits. They argue that unchecked entitlement growth threatens economic stability and burdens future generations.
“We need to make tough choices to rein in spending and ensure our fiscal health,” remarks Senator Mitch McConnell (R-KY) .
Conservative proposals include:
- Raising the eligibility age for Social Security and Medicare.
- Implementing means-testing to focus benefits on those in need.
- Converting Medicare to a premium support system to encourage competition.
Comparable or Historical Cases
A. 1983 Social Security Reform
Facing imminent insolvency, bipartisan efforts led to the Social Security Amendments of 1983, which included:
- Gradually increasing the retirement age.
- Taxing Social Security benefits for higher-income recipients.
These reforms extended the program’s solvency and demonstrated the potential for cross-party collaboration.
“The 1983 reforms exemplify how bipartisan cooperation can address fiscal challenges effectively,” notes Dr. Robert Reischauer, former CBO Director .
1990 Budget Enforcement Act
In response to rising deficits, the Budget Enforcement Act of 1990 introduced:
- Discretionary spending caps.
- Pay-as-you-go (PAYGO) rules requiring new spending or tax changes to be offset.
These mechanisms contributed to budget surpluses in the late 1990s.
Policy Implications and Forecasting
The CBO’s projections indicate that, without policy changes, the federal debt will continue to grow, potentially reaching 156% of GDP by 2055 .
- Reduced fiscal flexibility to respond to economic crises.
- Higher interest rates crowding out private investment.
- Increased burden on future taxpayers.
Addressing these challenges requires a combination of spending restraint and revenue enhancement. Potential policy actions include:
- Comprehensive tax reform to broaden the base and increase revenues.
- Entitlement program adjustments to ensure long-term sustainability.
- Implementation of fiscal rules to enforce budgetary discipline.
Conclusion
The Congressional Budget Office’s Budget and Economic Outlook: 2025 to 2035 paints a stark picture of the fiscal crossroads confronting the United States. Over the next decade, federal deficits are projected to rise significantly, driven largely by structural imbalances in entitlement spending, demographic shifts, and increasing interest payments on the national debt. Absent any legislative intervention, the debt held by the public is expected to reach 118% of GDP by 2035, putting the nation on a trajectory that economic experts across the political spectrum regard as unsustainable.
This fiscal reality underscores a central tension in American political and economic governance: the clash between expanding public obligations and the limitations of the federal government’s revenue-generating capacities. At the heart of this issue lies a constitutional and policy dilemma—how to reconcile the federal government’s duty to provide for the general welfare, particularly through programs such as Social Security, Medicare, and Medicaid, with the imperative to preserve long-term fiscal integrity and intergenerational equity.
Stakeholders across the ideological divide offer starkly different prescriptions for remedying this imbalance. Progressives advocate for protecting and expanding the social safety net through redistributive tax policies that place greater burdens on high-income individuals and corporations. They argue that inequality, not spending, is the core issue and that a modern economy can afford more robust public investment. In contrast, conservatives assert that continued deficit spending risks economic stagnation and undermines national security. They argue for entitlement reform, budget caps, and other fiscal discipline mechanisms to curtail automatic spending growth and restore financial sustainability.
Both viewpoints contain valid concerns rooted in competing but constitutionally legitimate interpretations of the federal government’s role. The challenge lies not in identifying the problem—the CBO has made that abundantly clear—but in forging the political consensus necessary to enact effective and equitable reforms. Historical precedent suggests that bipartisan action, though difficult, is possible. The Social Security Amendments of 1983 and the Budget Enforcement Act of 1990 demonstrate that Congress can, under fiscal duress, produce durable and pragmatic solutions when motivated by both necessity and political will.
Going forward, any credible policy solution must be comprehensive and balanced. It must involve not only reform of mandatory spending programs but also rationalization of the tax code to ensure fairness and efficiency. Additionally, the federal government may need to reconsider the use of automatic stabilizers, discretionary caps, and enforcement mechanisms like PAYGO to reinstitute fiscal discipline while maintaining economic responsiveness.
“This is not merely an economic issue—it is a question of national stewardship,” said Dr. Robert Reischauer, a former CBO director. “The decisions we make in the next few years will shape the opportunities available to future generations of Americans.”
The future of the nation’s fiscal policy will likely be determined not just by technocratic analyses or partisan priorities, but by a deeper reckoning with what kind of government Americans want—and are willing to pay for. As lawmakers debate the path forward, a critical question emerges: Will the United States rise to meet the challenge of its fiscal future, or defer difficult choices until the consequences become unavoidable?
For Further Reading
- “The U.S. Fiscal Outlook: Challenges and Opportunities”
https://www.brookings.edu/articles/the-u-s-fiscal-outlook-challenges-and-opportunities - “Time to Rein in Federal Spending: A Roadmap for Sustainable Budgets”
https://www.heritage.org/budget-and-spending/report/time-rein-federal-spending-roadmap-sustainable-budgets - “Addressing the Federal Deficit Without Undermining the Safety Net”
https://www.cbpp.org/research/federal-budget/addressing-the-federal-deficit-without-undermining-the-safety-net - “How to Balance the Budget Without Raising Taxes”
https://www.cato.org/commentary/how-balance-budget-without-raising-taxes - “The Real Fiscal Reckoning Is Coming”
https://www.theatlantic.com/ideas/archive/2024/12/us-federal-budget-debt-deficit/676185