On October 31, Committee for a Responsible Federal Budget senior vice president and senior policy director Marc Goldwein gave a presentation on the relationship between R (the interest rate) and G (the economic growth rate) and its impact on national debt dynamics.

2. CRFB.org

3. CRFB.org
R, G, and Debt Sustainability
Some Definitions
R = Average interest rate on government debt
G = Average growth rate of U.S. economy (GDP)
Debt Sustainability = When national debt grows
slower than gross domestic product (GDP) or
expected to stop growing before getting too high

4. CRFB.org
Some Features of R and G
1. R describes the growth of current debt, while
G represents its erosion (relative to GDP)
2. When R<G, debt may be sustainable even
when non-interest spending exceeds revenue
3. When R<G, one-time borrowing has little
effect on long-term debt-to-GDP
4. For the last 15 years, R has been below G

5. CRFB.org
Some Features of R and G
Primary Surplus Primary Balance Primary Deficit
R>G Debt sustainable if
P-surplus ≥ (R-G)*debt
Debt grows indefinitely
(debt spiral)
Debt grows indefinitely
(debt spiral)
R=G Debt falls indefinitely
(sustainable)
Debt remains stable
(likely sustainable)
Debt grows indefinitely
(likely unsustainable)
R<G Debt becomes wealth:
P-surplus/(G-R)
Debt/GDP trends to 0%
(sustainable)
Debt trends to:
P-Deficit/(G-R)

6. CRFB.org
When R<G, Debt MAY Be Sustainable
IF: Interest rates are below the growth rate (R<G)
AND: Interest rates are stable over time
AND: Growth rate is stable over time
AND: Primary deficits stay constant % of GDP
THEN: Debt will stabilize at:
𝑃𝑟𝑖𝑚𝑎𝑟𝑦 𝐷𝑒𝑓𝑖𝑐𝑖𝑡
𝐺 − 𝑅

7. CRFB.org
Debt Asymptotes w/ Stable P-Deficit & R<G
Sources: Committee for a Responsible Federal budget.
2023 2050 2100 2150 2200 2250 2300 2350 2400 2450 2500
0%
50%
100%
150%
200%
250%
300%
Debt-to-GDP w/ 3 percent of GDP primary deficit, 4% growth rate, 3% interest rate

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Debt Asymptotes w/ Stable P-Deficit & R<G
Sources: Committee for a Responsible Federal budget.
2023 2050 2100 2150 2200 2250 2300 2350 2400 2450 2500
0%
50%
100%
150%
200%
Debt-to-GDP w/ 2 percent of GDP primary deficit, 4% growth rate, and 3% interest rate

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And One-Time Borrowing Doesn’t Matter Much
Sources: Committee for a Responsible Federal budget.
2023 2050 2100 2150 2200 2250 2300 2350 2400 2450 2500
0%
50%
100%
150%
200%
Debt-to-GDP w/ 2 percent of GDP primary deficit in most years but 10 percent in 2050 and 2051, 4% growth rate, 3% interest rate

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11. CRFB.org
Sustainable debt requires several of:
❑ Manageable debt levels
❑ Modest and stable (primary) deficits
❑ Favorable demographics
❑ Limited health care cost growth
❑ Robust revenue collection
❑ Responsive and responsible political system
❑ Interest rates below the growth rates (R<G)
Debt Sustainability Requires Multiple Ingredients

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❑Manageable debt levels
❑ Modest and stable (primary) deficits
❑ Favorable demographics
❑ Limited health care cost growth
❑ Robust revenue collection
❑ Responsive and responsible political system
❑ Interest rates below the growth rates (R<G)
Ingredients for Debt Sustainability

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Debt Is Nearing Record Levels
Sources: Committee for a Responsible Federal Budget, Congressional Budget Office
Debt Held by the Public as a Percent of GDP
115%
50-Year Historic Average: 47%
Previous Record: 106%
0%
20%
40%
60%
80%
100%
120%
1790 1810 1830 1850 1870 1890 1910 1930 1950 1970 1990 2010 2030
Previous Record
Broken in 2029

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And Is Projected to Rise Rapidly
Federal Debt Held by the Public, Percent of GDP
Source: Congressional Budget Office.
181%
132%
90%
110%
130%
150%
170%
190%
210%
230%
250%
2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 2049 2051 2053

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✓ Manageable debt levels
❑Modest and stable (primary) deficits
❑ Favorable demographics
❑ Limited health care cost growth
❑ Robust revenue collection
❑ Responsive and responsible political system
❑ Interest rates below the growth rates (R<G)
Ingredients for Debt Sustainability

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Deficits Just Doubled
Note: 2022 deficit excludes cost of student debt cancellation.
Source: Committee for a Responsible Federal Budget, Congressional Budget Office
Annual Budget Deficit, Excluding Student Debt
Cancellation Stopped by Supreme Court (trillions)
$3.1T
$2.8T
$1.0T
$2.0T
$0.0T
$0.5T
$1.0T
$1.5T
$2.0T
$2.5T
$3.0T
2017 2018 2019 2020 2021 2022 2023
COVID-era
Spending Surge

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✓ Manageable debt levels
✓ Modest and stable (primary) deficits
❑Favorable demographics
❑ Limited health care cost growth
❑ Robust revenue collection
❑ Responsive and responsible political system
❑ Interest rates below the growth rates (R<G)
Ingredients for Debt Sustainability

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American is Getting Older
18
0
20
40
60
80
100
120
1980 1990 2000 2010 2020 2030 2040 2050 2060 2070
Population 65 or Older, Millions
65 to 74
75 to 84
85 to 94
95 or Older
Source: Committee for a Responsible Federal Budget estimates based on Congressional Budget Office
and U.S. Census Bureau data.
HISTORIC PROJECTED

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Dedicated Revenue
10%
11%
12%
13%
14%
15%
16%
17%
18%
19%
1987
1991
1995
1999
2003
2007
2011
2015
2019
2023
2027
2031
2035
2039
2043
2047
2051
2055
2059
2063
2067
2071
2075
2079
2083
2087
2091
2095
Increasing the Cost of Social Security and Medicare
Percent of Taxable Payroll
Source: Social Security Administration.
HISTORIC PROJECTED

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Sources: Social Security Trustees, Medicare Trustees, and Congressional Budget Office.
Percent of Annual Spending
And Driving Them Toward Insolvency
Social Security (OASI)
2033
23% cut
Medicare HI
2031
11% cut
Highway
2028
47% cut
0%
50%
100%
150%
200%
250%
300%
350%
400%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034

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✓ Manageable debt levels
✓ Modest and stable (primary) deficits
✓ Favorable demographics
❑Limited health care cost growth
❑ Robust revenue collection
❑ Responsive and responsible political system
❑ Interest rates below the growth rates (R<G)
Ingredients for Debt Sustainability

22. CRFB.org
Health Costs are High in the U.S.
Note: Data from 2013
Source: Organization for Economic Cooperation and Development
Health Expenditures as Percent of GDP
Canada
10.3%
France
11.4% Japan
10.8%
Portugal
9.1%
Switzerland
11.3%
United States
16.3%
8.2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Australia
Austria
Belgium
Brazil
Canada
Chile
China
Colombia
Costa
Rica
Czech
Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
India
Indonesia
Ireland
Israel
Italy
Japan
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New
Zealand
Norway
Poland
Portugal
Russia
Slovak
Republic
Slovenia
South
Africa
South
Korea
Spain
Sweden
Switzerland
Turkey
United
Kingdom
United
States
Average
Public Private

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0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
1983 1988 1993 1998 2003 2008 2013 2018 2023 2028 2033 2038 2043 2048 2053
Medicaid, CHIP, and
ACA Subsidies
Medicare
And Federal Health Spending Keeps Growing
Source: Congressional Budget Office
Percent of GDP
HISTORIC PROJECTED

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With Aging and Excess Cost Growth Largely Responsible
Source: Congressional Budget Office
Current Spending
11.6%
Without Aging and
Excess Cost Growth
10.8%
Aging of the Population
2.5%
Excess Cost Growth
3.0%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2023 2053

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✓ Manageable debt levels
✓ Modest and stable (primary) deficits
✓ Favorable demographics
✓ Limited health care cost growth
❑Robust revenue collection
❑ Responsive and responsible political system
❑ Interest rates below the growth rates (R<G)
Ingredients for Debt Sustainability

26. CRFB.org
Sources: Congressional Budget Office, Department of Treasury, Bureau of Economic Analysis, and Committee for a
Responsible Federal Budget.
Total Federal Revenues, Percent of Gross Domestic Product
FY 2000:
20.0%
FY 2022:
19.3%
FY 2023:
16.5%
50-year annual average:
17.4%
12%
14%
16%
18%
20%
22%
1973 1978 1983 1988 1993 1998 2003 2008 2013 2018 2023
Revenue is Back Below Historic Averages

27. CRFB.org
Tax Expenditures Cost $1.7 Trillion Per Year
Note: Chart depicts FY2023 levels
Sources: Congressional Budget Office, Joint Committee on Taxation
Trillions
Individual
$1.5T
Corporate
$0.2T
$1.7T $1.7T
$1.6T
$1.3T
$0.5T
$1.7T
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0
Discretionary
Spending
Major
Health Care
Payroll
Tax
Social
Security
Corporate
Income Tax
Tax
Expenditures

28. CRFB.org
Note: Due to updated methodologies, these figures are not directly comparable. Figures for tax years up
to and including TY 2014-2016 reflect official IRS estimates. Figures for TY 2017-2019, 2020, and 2021
reflect preliminary projections, and are subject to revision. The TY 2017-2019 projection has been updated
since it was first published in October 2022.
Source: Internal Revenue Service, Treasury Department.
Billions
$344 billion
$380 billion
$428 billion
$481 billion
$539 billion
$625 billion
$394 billion
$438 billion
$496 billion
$550 billion
$601 billion
$688 billion
$0
$100
$200
$300
$400
$500
$600
$700
2008-2010 2011-2013 2014-2016 2017-2019 2020 2021
Net Tax Gap
Late Payments and Enforcement Activities
And the Tax Gap Costs $600 Billion More

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✓ Manageable debt levels
✓ Modest and stable (primary) deficits
✓ Favorable demographics
✓ Limited health care cost growth
✓ Robust revenue collection
❑Responsive and responsible political system
❑ Interest rates below the growth rates (R<G)
Ingredients for Debt Sustainability

30. CRFB.org
We Keep Adding Tax Cuts & Spending to the Debt
Billions
* Cost of Tax Cuts & Jobs Act is estimated on a conventional basis for comparison purposes
Sources: Committee for a Responsible Federal Budget, Congressional Budget Office, Congressional Research Service.
2001 Bush
tax cuts
$1,300
Wars in Iraq
and
Afghanistan
(many pieces
of legislation)
$1,600
2009 stimulus
bill (American
Recovery &
Reinvestment
Act)
$800
Affordable
Care Act
(ACA)
$0
2011 Budget Control Act
-$1,745
Permanent Bush Tax Cut
Extension/Fiscal Cliff Deal
(2012 ATRA)
$4,000
BBA 2013
-$25
Tax Cuts &
Jobs Act
$1,800*
BBA
2019
$1,470
CARES
Act
$1,725
American
Rescue Plan
$1,845
PACT Act
$470
FY 2022
Omnibus
$570
Fiscal
Responsibility
Act
-$1,340
-$3,000
-$2,000
-$1,000
$0
$1,000
$2,000
$3,000
$4,000
$5,000

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Politicians May Pass Costly Policy Extensions
Sources: Committee for a Responsible Federal Budget Build Your Own Tax Extensions Model, Joint Committee on
Taxation, and Congressional Budget Office.
Expiring Provision
Cost of Extension
(2026-2035)
Reduce individual income tax rates to 10|12|22|24|32|35|37 $3.2 trillion
Repeal ‘Pease’ deduction limit & Alternative Minimum Tax for most taxpayers $800 billion
Replace personal and dependent exemption with doubled Child Tax Credit
($1,000 to $2,000) and larger standard deduction
$40 billion
Establish 20% deduction for certain pass-through business income $720 billion
Expand Opportunity Zones $80 billion
Limit state and local tax (SALT) deduction to $10,000 per taxpayer -$960 billion
Limit or repeal other tax deductions -$280 billion
Limit deductibility of business losses against ordinary income. -$200 billion
Subtotal, TCJA Extensions $3.4 trillion
Expanded Affordable Care Act premium credits $370 billion
Total $3.8 trillion

32. CRFB.org
And They Are Taking Solutions Off the Table
Note: Taxes above $200k and $400k includes all corporate and estate taxes as well as income and payroll taxes
above those thresholds. Estimates are rough.
Sources: Committee for a Responsible Federal Budget and Congressional Budget Office.
Percentage Spending Cut or Tax Increase
26%
44%
76%
31%
47%
74%
11%
19%
34%
14%
21%
33%
0%
20%
40%
60%
80%
100%
All Spending Exempt Soc.
Security &
Defense
Exempt SS,
Defense, VA, &
M'care
All Taxes All Taxes
Above
$200K
All Taxes
Above
$400K
Balance the Budget Stabilize the Debt (98% of GDP)

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✓ Manageable debt levels
✓ Modest and stable (primary) deficits
✓ Favorable demographics
✓ Limited health care cost growth
✓ Robust revenue collection
✓ Responsive and responsible political system
❑Interest rates below the growth rate (R<G)
Ingredients for Debt Sustainability

34. CRFB.org

35. CRFB.org
✓ Manageable debt levels
✓ Modest and stable (primary) deficits
✓ Favorable demographics
✓ Limited health care cost growth
✓ Robust revenue collection
✓ Responsive and responsible political system
❑Interest rates below the growth rate (R<G)
Ingredients for Debt Sustainability

36. CRFB.org
0%
2%
4%
6%
8%
10%
12%
14%
1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 2018 2023 2028 2033
GDP Growth Rate
(3-Year Avg)
Source: Congressional Budget Office, Committee for a Responsible Federal Budget
Interest Rates Have Been Below the Growth Recently
Historic Projected

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But R<G Doesn’t Guarantee Sustainability!
Keep In Mind That:
1. If primary deficits grow, debt will too
2. Debt-to-GPD can rise for decades or centuries
even with stable R, G, and primary deficits
3. Rising debt boost R and shrinks G
4. R and G can change quickly as debt rolls over,
and R>G for new debt, already!

38. CRFB.org
If Primary Deficits Grow, Debt Will Too
Sources: Committee for a Responsible Federal budget.
2023 2050 2100 2150 2200 2250 2300 2350 2400 2450 2500
0%
100%
200%
300%
400%
500%
600%
Debt-to-GDP w/ 2 percent of GDP primary deficit growing .01 percentage points annually, 4% growth rate, 3% interest rate

39. CRFB.org
Stabilization in Thousands of Years is of Little Comfort
Sources: Committee for a Responsible Federal budget.
2023 2050 2100 2150 2200 2250 2300 2350 2400 2450 2500
0%
200%
400%
600%
800%
1000%
1200%
Debt-to-GDP w/ 3 percent of GDP primary deficit, 4% growth rate, 3.8% interest rate

40. CRFB.org
Sources: Committee for a Responsible Federal budget.
0%
100%
200%
300%
400%
500%
2023 2033 2043 2053 2063 2073
Debt scenarios w/ 2% of GDP stable primary deficit
Debt Boosts R and Shrinks G

41. CRFB.org
5.6%
5.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2013
2013
2013
2014
2014
2015
2015
2015
2016
2016
2017
2017
2018
2018
2018
2019
2019
2020
2020
2020
2021
2021
2022
2022
2023
2023
2023
Likely Growth Rate: 3.8%
3-Month Bill
10-Year Note
And Now, R>G on New Debt
Source: U.S. Department of Treasury

42. CRFB.org
Which Could Lead to Rapid Debt Growth
Sources: Committee for a Responsible Federal Budget.
*Interest rates increase 2bp and GDP growth decreases 0.25bp for every one percentage point increase in debt-to-GDP
2023 2050 2075 2100
0%
100%
200%
300%
400%
500%
Debt-to-GDP with 2.5 percent of GDP primary deficit, 3.8% growth rate, 4.8% interest rate

43. CRFB.org
Or Even Spark An Uncontrollable Debt Spiral
2023 2050 2075 2100
0%
100%
200%
300%
400%
500%
Debt-to-GDP with 2.5 percent of GDP primary deficit, 3.8% growth rate, 4.8% interest rate
Sources: Committee for a Responsible Federal Budget.
*Interest rates increase 2bp and GDP growth decreases 0.25bp for every one percentage point increase in debt-to-GDP

44. CRFB.org
Will Rates Stay High, Rise, or Come Back Down?
Reasons for Optimism:
• Fed plans to cut rates and eventually end QT
• Aging of population means more savers
• Rising global wealth means more savings
• Rising rates may reflect rising productivity growth
Reasons for Pessimism:
• Strong inflation & employment → higher for longer
• Aging of the aged means more dissavers
• Rising global income means more spenders
• Rising sovereign debt boost rates, slows growth

45. CRFB.org
71%
74%
82%
75%
34%
59%
69%
30%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Below 2% Below 3% Below 4% Below Inflation
3-month yield
10-year yield
Most Debt Was Issued Under Low Interest Rates –
Now It Is Rolling Over!
Share of Debt Held By the Public By Interest Rate of Original Issuance
Source: Congressional Budget Office, Department of the Treasury, Committee for a Responsible Federal Budget

46. CRFB.org

47. CRFB.org
❖ High inflation due to excessive demand
❖ Slower economic and income growth due to crowd out
❖ Rising interest rates due to crowd out
❖ Rising interest payments consuming tax revenue
❖ Increased geopolitical risk due to our lenders, declining
fiscal flexibility, and weakened international standing
❖ Less fiscal space to respond to disasters or crises
❖ Loss of policy dynamism, leading to inefficient
and outdated tax and spending policies
❖ Risk of fiscal crisis, where panic over debt causes
financial market turmoil
High and Rising Debt Has Many Other Consequences

48. CRFB.org
0%
1%
2%
3%
4%
5%
6%
7%
8% Calculation based on Q4/Q4
7.1%
5.7%
Fed 2% Average Inflation Target
PCE Price Index
Consumer Price Index (CPI)
Deficits Can Lead to High Inflation
Source: Committee for a Responsible Federal Budget, Bureau of Economic Analysis, Bureau of Labor Statistics.

49. CRFB.org
Debt Can Slow Income Growth
Sources: Congressional Budget Office and Committee for a Responsible Federal Budget.
Numbers may not sum due to rounding.
$124,800
$116,800
$110,700
$80,000
$85,000
$90,000
$95,000
$100,000
$105,000
$110,000
$115,000
$120,000
$125,000
$130,000
Trend Growth Baseline Debt Faster Rising Debt
+$45,200
+$37,200
+$31,000
Real Gross National Product Per Person in 2053 (2023 Dollars)

50. CRFB.org
5.6%
5.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2013
2013
2013
2014
2014
2015
2015
2015
2016
2016
2017
2017
2018
2018
2018
2019
2019
2020
2020
2020
2021
2021
2022
2022
2023
2023
2023
Likely Growth Rate: 3.8%
3-Month Bill
10-Year Note
Source: U.S. Department of Treasury
It Can Boost Interest Rates

51. CRFB.org
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Sources: Congressional Budget Office, Committee for a Responsible Federal Budget
Projected Spending Under CBO’s Baseline (Billions)
Medicare
Defense
Net Interest
Historic Projected
Hits New Record as a
Share of GDP
And Explode Interest Costs

52. CRFB.org
Looming Trust Fund Insolvency Could Mean Abrupt Cuts
Projected Benefit Cut for Couple Retiring in 2033 (Current Dollars, 2033)
Sources: Social Security Administration and Committee for a Responsible Federal Budget.
-$7,900
-$13,100
-$17,300
-$10,600
-$17,400
-$23,000
-$25,000
-$20,000
-$15,000
-$10,000
-$5,000
$0
Low-Income Medium-Income High-Income
Single-Income Couple
Dual-Income Couple

53. CRFB.org
The U.S. Needs Trillions of Dollars of Debt Reduction
Through 2028
(5 years)
Through 2033
(10 years)
Debt Targets
110 percent of GDP n/a $2.0 trillion
100 percent of GDP $1.8 trillion $5.9 trillion
90 percent of GDP $5.0 trillion $9.8 trillion
80 percent of GDP $8.3 trillion $13.8 trillion
Deficit Targets*
4 percent of GDP $2.0 trillion $6.4 trillion
3 percent of GDP $3.3 trillion $8.7 trillion
On-Budget Balance $6.2 trillion $12.7 trillion
Primary Balance $3.6 trillion $8.8 trillion
Balance $7.3 trillion $15.7 trillion
Deficit Reduction Needed to Achieve Certain Fiscal Targets

54. CRFB.org
If Not Now, When?