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

Alan J. Auerbach and William Gale

Tax Policy and the Economy, 2026, vol. 40, issue 1, 47 - 108

Abstract: It is well understood that the United States 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 find that the debt-to-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-to-GDP ratio of about 100% and a pre-OBBBA Congressional Budget Office (CBO) analysis earlier this year that projected the 2054 debt-to-GDP ratio to be 154%. We estimate a fiscal gap—the permanent tax or spending changes needed to keep the 2054 debt-to-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.

Date: 2026
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