The House Budget Resolution won’t solve the debt problem

When the House Republicans passed their 2025 Budget Resolution[i], only one Republican voted against it, Thomas Massie (R-KY). His post on X stated: The GOP budget extends the 5 yr. tax holiday we’ve been enjoying, but because it doesn’t cut spending much, it increases the deficit by over $300 billion/yr. compared to letting tax cuts expire. Over 10 years, this budget will add $20 trillion to US debt.[ii]

I might choose to argue whether the cuts in spending are “much” or not, but the House Budget Resolution, if implemented, will indeed add an estimated $20 trillion to the US debt. The policy statement included with the budget resolution includes as its first and third findings:

(1) The United States faces a significant debt crisis, with the national debt currently exceeding $36 trillion, or 123% of GDP (Ed. note: Gross Domestic Product, the total market value of all goods and services produced during the year)

(3) This debt poses a significant risk to the country’s long-term fiscal sustainability, with implications for future generations.

I agree that we are in a crisis of our own making and using the ratio of national debt to GDP is a fair approach of viewing the situation. Not solving this issue will have not only severe consequences for future generations, but it will have severe consequences for current generations, as well.

And yet, the budget resolution increases the accumulated debt to $56 trillion by 2034. That is an increase of over 50% in ten years’ time, about 4.4% compounded each year.

During the 21^st century, GDP grew faster than 4.4% in only one year[iii]. In 2021, it grew 5.8%; however, that followed the 2.21% decline in 2020. Combined, those two years averaged just 1.7% (compounded) growth.

To assume we will magically find our way (while decreasing immigration) to increase our GDP by more than a compounded 4.4% a year is unrealistic.

Therefore, Republicans identified the number one concern that debt was 123% of GDP, and after ten years, their proposed budgets will leave us with debt significantly greater than 123% of GDP.

How much greater? That depends on how fast GDP actually grows. The average compound growth rate for the 21^st century has been slightly under 2.5%. If we assume that continues, in ten years, the ratio of debt to GDP climbs to 187%. If GDP increased at 3% per year, the ratio is “only” 142%.

With this expected explosion of increased debt, the budget resolution proposed to increase the statutory debt limit by only $4 trillion, covering only two of the ten years. While I think having a debt limit is counterproductive at best and insane at worst, if Republicans want to propose budgets that will increase US debt by $20 trillion, then they should be transparent and raise the debt limit to cover it.

In a future post, I’ll provide my thoughts on how the budget resolution allocates cuts and where it provides for increased spending.

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[i] House Budget Resolution 2025 https://docs.house.gov/meetings/BU/BU00/20250213/117894/BILLS-119NAih.pdf

[ii] Massie X post https://www.newsweek.com/republican-breaks-gop-budget-plan-vote-2036282

[iii] US Annual GDP Growth https://www.macrotrends.net/global-metrics/countries/USA/united-states/gdp-growth-rate