The US economy is on course for a prolonged slowdown, with the Congressional Budget Office warning of surging debt, rising interest costs, and a shrinking workforce. As policymakers debate tax cuts and spending reforms, the long-term outlook raises tough questions about growth and fiscal sustainability.
The Congressional Budget Office (CBO) has delivered a sobering long-term forecast for the US economy, projecting three decades of slower growth, spiralling debt, and rising fiscal pressures driven by demographic shifts and rising interest costs.
Released on Thursday, the CBO’s 2025–2055 outlook forecasts a significant slowdown in the pace of economic expansion, with real GDP growth declining from 2.1% in 2025 to just 1.4% by 2055. Alongside that, publicly held debt is projected to balloon to 156% of GDP by 2055—an alarming increase from 100% in 2025 and far beyond historical norms.
While that figure is slightly lower than the CBO’s 2024 projection, it reflects a deteriorating trajectory nonetheless—one shaped by entrenched structural challenges rather than cyclical downturns.
At the heart of the CBO’s warning is the rapid escalation of federal borrowing. Deficits are expected to rise from 6.2% of GDP in 2025 to 7.3% in 2055, well above the 30-year historical average of 3.9%.
More concerning still is the surge in interest payments. By 2055, the government is projected to spend 5.4% of GDP servicing its debt—exceeding the budget for all discretionary programmes combined, including defence, law enforcement, and air traffic control. In short, the cost of borrowing will outpace the cost of governing.
The economic drag isn’t only fiscal—it’s demographic. Slower population growth and an ageing workforce are expected to weigh heavily on productivity and output. According to the CBO, the US will begin to see a net population decline from 2033 without continued immigration.
That decline will reverberate across the economy. Fewer workers mean slower growth, a shrinking tax base, and rising costs for programmes like Social Security, which is projected to increase from 5.2% to 6.1% of GDP by 2055.
Put simply, the economic engine is running low on fuel—and immigration is one of the few remaining sources of replenishment.
Importantly, the CBO’s projections are based on current law—a model that excludes potentially seismic policy changes. President Trump’s push to extend the 2017 tax cuts and roll out new tariffs is not reflected in the forecast. Neither are the proposed workforce reductions in the federal government or aggressive immigration crackdowns.
According to Michael Peterson, CEO of the Peter G. Peterson Foundation, the outlook may already be too rosy: “As bad as this outlook is, it represents an optimistic scenario. If tax cuts are extended, we’re looking at trillions more in added debt.”
Treasury Secretary Scott Bessent has dismissed the CBO’s modelling as overly pessimistic, calling the agency’s scoring “crazy” and pushing instead for what he terms the “3-3-3” plan: lowering the deficit to 3% of GDP, sustaining GDP growth at 3%, and ramping up oil production by 3 million barrels per day by 2028.
Yet that vision appears increasingly difficult to square with the CBO’s demographic and fiscal data. The prospect of sustained 3% growth seems remote in an economy facing both a shrinking labour pool and mounting debt.
For financial professionals and fiscal policymakers, the report sharpens the focus on long-term sustainability. Interest rate projections are expected to stay relatively flat, but the sheer volume of debt will increase exposure to foreign creditors and raise the stakes of any shift in investor sentiment.
The US has already hit its debt ceiling before, and this year’s statutory limit looms again. Without bipartisan action, the so-called “X-date”—the point at which the Treasury can no longer meet its obligations—could arrive as early as July.
Meanwhile, attempts to cut spending are complicated by growing costs in mandatory programmes and ageing demographics. And while some policymakers may lean on growth to escape the debt trap, the CBO report makes clear that growth itself is becoming a scarce commodity.