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When Does Federal Debt Reach Unsustainable Levels?

PWBM estimates that---even under myopic expectations---financial markets cannot sustain more than the next 20 years of accumulated deficits projected under current U.S. fiscal policy. Forward-looking financial markets are, therefore, effectively betting that future fiscal policy will provide substantial corrective measures ahead of time. If financial markets started to believe otherwise, debt dynamics would “unravel” and become unsustainable much sooner.

When Does Federal Debt Reach Unsustainable Levels?
PDF Brief Brief

Stabilize Federal Debt Economic Growth

This legacy brief is available as a downloadable PDF.

Income-Driven Repayment Plans: Modeling Take-up Rates

Federal student loan borrowers can currently choose between several repayment options. When estimating program costs, government agencies have considered several different behavioral repayment models. We find that the most financially savvy rule – where borrowers select the repayment option that minimizes the present value of their future repayments – best explains current borrower choices among repayment options that exist prior to the new Income-Driven Repayment Plan (IDR) “SAVE” plan to be implemented in July 2024.

Income-Driven Repayment Plans: Modeling Take-up Rates

The Build It in America Act: Budgetary and Macroeconomic Effects of Title I

PWBM estimates that Title I of the Build It in America Act would add $76 billion to the budget deficit over the next decade and reduce deficits by $18 billion during the subsequent second decade. It would temporarily boost business investment and GDP during the next two years while lowering GDP in subsequent years. If lawmakers made the extensions permanent, the budgetary cost would rise to $1.25 trillion over the next two decades and GDP would largely remain unchanged, as the tax incentive effects and debt effects mostly offset.

The Build It in America Act: Budgetary and Macroeconomic Effects of Title I

The Tax Cuts for Working Families Act: Estimated Budgetary and Distributional Effects

PWBM estimates the Tax Cuts for Working Families Act would reduce federal revenues by $96 billion over a decade, cutting taxes for a majority of households in 2024. Households in the bottom quintile households, and those in the top 1 percent, generally would not benefit. As an illustration, we also consider making the provisions permanent, which raises the estimated ten-year budget cost to be between $419 billion and $527 billion.

The Tax Cuts for Working Families Act: Estimated Budgetary and Distributional Effects

The Fiscal Responsibility Act of 2023: Budget Cost Estimates of the Debt Ceiling Agreement

We estimate the Fiscal Responsibility Act (“FRA”) of 2023 will reduce noninterest spending by $1.3 trillion over the 10-year budget window using standard scoring assumptions. If discretionary spending in Fiscal Year 2026, after sequestration is no longer in effect, deviates from standard scoring assumptions, the spending reduction could be as low as $234 billion or as high as $1.8 trillion.

The Fiscal Responsibility Act of 2023: Budget Cost Estimates of the Debt Ceiling Agreement

The Long-Term Budget Effects of Permanently Extending the 2017 Tax Cuts and Jobs Act’s Expiring Provisions

Several revenue and spending provisions in The Tax Cuts and Jobs Act (TCJA) are scheduled to expire (“sunset”) by the end of 2025. We estimate that “extenders” (“no sunset”) would increase the federal debt held by the public from 226.0 percent of GDP to 261.1 percent of GDP by 2050.

The Long-Term Budget Effects of Permanently Extending the 2017 Tax Cuts and Jobs Act’s Expiring Provisions