CBO Estimates $3 Trillion of Debt from House-Passed OBBBA

The Congressional Budget Office (CBO) released an updated cost estimate for the House-passed One Big Beautiful Bill Act (OBBBA) today, projecting that the bill would add over $2.4 trillion to primary deficits over ten years. Read more about the bill's specific provisions here.

After accounting for interest costs on the new debt, we estimate that by Fiscal Year (FY) 2034 the bill would:

• Increase debt by nearly $3 trillion, or roughly $5 trillion if made permanent.
• Increase the deficit to 7.0 percent of Gross Domestic Product (GDP) by 2026.
• Double interest costs between 2024 and 2034 to $1.8 trillion (4.2 percent of GDP).
• Increase debt from 100 percent of GDP today to 124 percent of GDP by 2034, 129 percent of GDP if made permanent, and 133 percent if interest rates remain high.
• Significantly front-load costs and back-load savings such that nearly three-quarters of the official primary deficit impact would be in the first four years and a quarter.

Based on CBO’s estimate, the House-passed bill includes roughly $5.3 trillion of tax cuts and spending partially offset by $2.9 trillion of revenue increases and spending cuts. Most significantly, the policies put forward by the Ways & Means Committee would increase deficits by $3.8 trillion, on net, while the policies in the Energy & Commerce title would reduce deficits by $1.1 trillion. With interest, the bill would add nearly $3.0 trillion to the debt through 2034 – or $5.0 trillion if various temporary provisions are made permanent.

Deficit Impact of the House-Passed One Big Beautiful Bill Act

Sources: Congressional Budget Office, Joint Committee on Taxation, and CRFB estimates

As written, OBBBA’s largest deficit impact would be in 2027, increasing the primary deficit that year by over $500 billion. By 2034, the bill would increase annual primary deficits by nearly $200 billion – with the fall due mainly to arbitrary expiration of significant tax cuts, along with the winding down of short-term spending priorities and the phase-in of various offsets.

Extending temporary tax and spending provisions permanently, the bill would add nearly $550 billion to the primary deficit in 2034.

As a result of this additional borrowing, OBBBA would increase the deficit to 7.0 percent of GDP by 2026, compared to a current law projected level of 5.5 percent. In 2034, deficits would total 6.8 percent of GDP under OBBBA or 7.8 percent of GDP if the bill were made permanent. That is significantly higher than the 6.1 percent of GDP deficit projected under current law.

A meaningful portion of the additional borrowing is due to higher interest costs. Under OBBBA, interest on the debt would double from nearly $900 billion in 2024 to $1.8 trillion (4.2 percent of GDP) by 2034. If interest rates were to remain elevated at current levels – with 10-year Treasuries at 4.5 percent – then interest costs would climb further to $2.1 trillion (5.1 percent of GDP) in 2034 or $2.2 trillion (5.2 percent of GDP) under a permanent OBBBA scenario.

Debt would also rise substantially under the House-passed bill. Under current law, debt is expected to climb from 100 percent of GDP today to a record 117 percent of GDP by 2034. Under the House-passed bill, debt would instead rise to 124 percent of GDP – or 129 percent of GDP if temporary provisions are made permanent. And under a scenario where heightened interest rates linger, debt could rise to as high as 133 percent of GDP.

Importantly, debt would rise to a similar level even when accounting for economic effects. The Joint Committee on Taxation has estimated the tax title would boost output late in the decade by 0.2 percent and produce $100 billion of dynamic feedback over the budget window. Assuming those figures double when the spending cuts are included, debt would rise to 123 percent of GDP in 2034 under the bill as written, as opposed to 124 percent.

The bill relies on familiar budget gimmicks to mask its potential impact. Specifically, it front-loads tax cuts and spending increases while delaying savings. Key tax breaks such as the enhancements to the standard deduction and Child Tax Credit, tax exemption for tips and overtime, 100 percent depreciation for production property, and other provisions are set to arbitrarily expire – mostly in 2028 or 2029. The bill also provides significant one-time appropriations for defense, border security, and immigration enforcement.

Largely due to these temporary changes, the bill’s costs are heavily front-loaded – with the majority of gross costs appearing in the first four-and-a-quarter years. Savings are also somewhat back-loaded due to delayed starts, phase-ins, and natural growth over time. On a net basis, nearly three-quarters of the deficit impact occurs in the first four-and-a-quarter years.

OBBBA would add far too much to the debt as written and could lead to far more fiscal damage than reported if temporary provisions are extended as intended (and as is currently being done to the 2017 tax cuts).

The bill could also boost near-term inflation, increase interest rates, add unnecessary complexity to the tax code, weaken market confidence, and slow long-term economic growth.

The Senate should work to make this bill more responsible.