Then and Now: A Look Back and Ahead at the Federal Budget

It is well-understood that the U.S. faces an unsustainable fiscal future. We review historical budget trends and basic fiscal processes. We provide new estimates of the budget outlook, incorporating the recently enacted One Big Beautiful Bill Act (OBBBA), and finding that the debt-GDP ratio will rise to 183% in 2054 under the OBBBA as legislated and to 199% if the temporary tax and spending provisions are made permanent. These figures compare to a current debt-GDP ratio of about 100% and a pre-OBBBA CBO analysis earlier this year that projected the 2054 debt-GDP ratio to be 154%. We estimate a fiscal gap – the permanent tax or spending changes needed to keep the 2054 debt-GDP ratio at its current level – to be about 3.4% of GDP if OBBBA is extended. We discuss the economic and political ramifications of debt and different ways to address the fiscal situation. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.