Debt Digest | US to Hit Debt Limit This Fall
Celebrating Charles Koch. Debt to Exceed 200 Percent of GDP by 2054 if Tax Cuts Are Not Offset. Trump cancels emergency spending.
The debt limit could bite by early fall (CBO). The Congressional Budget Office (CBO) projects that the United States will likely run out of extraordinary borrowing authority and be constrained by the statutory debt limit by August or September 2025, though it could come as early as May or June if revenues fall short of expectations. With debt at 100 percent of GDP and climbing, inflation stubbornly above the Fed’s target, and interest costs that exceed what the United States spends on national defense (see figure below), addressing the debt limit deadline responsibly is more critical than ever. Every major deficit deal since 1985 has paired debt limit increases with fiscal reforms. As Congress is debating an extension of expiring tax provisions and accompanying spending reductions, they should set a more ambitious target of reducing future spending growth such that the US budget is on a path to long-term balance and debt stops growing as a share of GDP.
The White House removes public spending database, undermining transparency and raising concerns about legality. As Rollcall’s Paul M. Krawzak reports, the Office of Management and Budget quietly took down its apportionments website, eliminating public access to data that show how federal funds are parceled out to agencies despite prior appropriations laws requiring real-time disclosure. On its own, this change is regrettable, as it reduces the transparency of federal spending and makes it more difficult for taxpayers to understand how their money is being spent. Worse yet, the move could pave the way for executive actions that bypass congressional intent on spending decisions, enabling the sort of executive impoundment that led to the apportionments website being required by Congress in 2022. Yes, the executive branch should do its part to cut spending, but the administration should work in close collaboration with Congress to achieve this objective, upholding fiscal transparency as a key component of that process.
President Trump prevents $3 billion in fake emergency spending. As Burgess Everett reports, the Trump administration will prevent $3 billion in emergency-designated spending from being spent. The $3 billion in fake emergency spending, mostly for foreign aid, was part of a larger package of “side-deals” in the Fiscal Responsibility Act—budget gimmicks that undermined discretionary spending caps. As EPIC’s David Ditch explains, this particular “gimmick requires the President declaring an emergency to unlock the money. The gimmick was negotiated under Biden and thus Trump has no obligation to play along. By simply not declaring these emergencies, taxpayers save $3 billion - and more after accounting for interest costs that the spending would have caused.” Trump is right not to declare an emergency, thereby saving taxpayer dollars. Routine abuse of emergency declarations has produced more than $14 trillion in federal borrowing, and this latest action by the Trump administration to refuse to declare a phony emergency is a step in the right direction.
CBO’s latest outlook warns of explosive debt and rising interest costs. In its long-term budget outlook released yesterday, CBO projects that federal debt will reach 156 percent of GDP by 2055 (see the graph below). That concerning figure, however, is overly optimistic since CBO assumes tax cuts won’t be extended and there won't be any new costly emergencies. If tax cuts aren’t offset, for example, CBO projects that debt in 2054 will reach 214 percent of GDP! The bad news doesn’t end there. Per CBO's outlook, interest costs are set to triple, exceeding all nondefense and defense discretionary spending by 2052. Excluding interest, the main driver of the rising debt is autopilot spending on Social Security and Medicare, which combined will grow to 11.2 percent of GDP by 2055 (an increase of 2.9 percent of GDP over 2025). Per the House Budget Committee: “Based on CBO projections, gross federal debt will reach $150 trillion by 2055, equivalent to more than $1 million per American household—four times the current debt burden of $274,000 per household. Adjusted for inflation, debt per household is projected to be nearly $600,000, which is three times current median household net worth ($192,900).” Absent reform, sudden, severe benefit cuts, major tax hikes, or out-of-control inflation become inevitable. A BRAC-style fiscal commission remains one of the most promising tools to overcome political gridlock and stabilize the debt before the situation spirals further. Delays only make solutions more difficult and painful—legislative courage is needed.
Celebrating Charles Koch’s Legacy of Liberty. (By Romina Boccia)
I was thrilled to learn that Charles Koch will receive the Milton Friedman Prize for Advancing Liberty from the Cato Institute this May in Washington D.C. Mr. Koch’s impact on advancing free markets and individual liberty is undeniable—but for me, it’s also deeply personal. Mr. Koch’s investments in developing policy talent through the Koch Internship and Associate Programs profoundly shaped the way I think and work today.
One of the most valuable lessons I learned from Mr. Koch is that lasting success—whether in business, policy, or social change—comes from creating real value for others. His emphasis on integrity, principled decision-making, and entrepreneurial thinking continues to guide how I approach policy challenges and opportunities. Importantly, I learned how to give clear, constructive feedback and receive it with gratitude, using principle based management tools like the situation-behavior-outcome (SBO) model—which has also been key to recruiting aligned talent. Mr. Koch’s books and programs equipped me with actionable skills for becoming a lifelong learner and mentor.
This award is a well-deserved recognition of Mr. Koch’s unwavering commitment to empowering people, fostering innovation, and expanding freedom. I’m grateful for the impact his work has had on my own life, and I hope you’ll join us in celebrating his legacy.
The Milton Friedman Prize Dinner will be held on Thursday, May 1, 2025.