Federal debt held by the public would reach 222 percent of GDP in 2056 if interest rates ran 1 percentage point above the Congressional Budget Office’s projections, the agency said in a letter released September 24. Under its extended baseline, which generally reflects current law, the debt already climbs from 101 percent of GDP this year to 175 percent in 2056.
The letter answered a request for two alternative scenarios. In the first, interest rates rise until they sit 1 percentage point above the baseline. Primary deficits, which leave out interest payments, average 2.3 percent of GDP from 2026 through 2056, against 2.1 percent in the baseline. Those deficits differ by 0.2 percentage points a year while the debt ends 47 points higher, so most of the added debt is interest.
The second scenario asks what it would take to hold the debt at this year’s 101 percent of GDP. CBO’s answer is primary deficits averaging 0.2 percent of GDP for 30 years, 1.9 percentage points smaller than current law produces, which means a primary budget close to balance every year for three decades. The baseline behind both scenarios assumes average annual GDP growth of 3.8 percent and an average interest rate of 4 percent on the debt held by the public.
Texas has budgeted under a constitutional limit since 1942. Article III, Section 49a of the Texas Constitution provides that, except in a case of emergency and with a four-fifths vote of each house, “no appropriation in excess of the cash and anticipated revenue of the funds from which such appropriation is to be made shall be valid.” No appropriation bill passes until the comptroller certifies that it fits inside the revenue estimate. A bill that exceeds the estimate goes back to the house where it started, and the Legislature has to raise the revenue or cut the appropriation.
That rule binds the Legislature in Austin and nothing beyond it. The federal debt that Texans carry along with the people of every other state in the union answers to no comptroller’s certificate, and under current law it grows by 74 percentage points of GDP over the next 30 years with no emergency declared and no four-fifths vote taken.
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