Statement of Concord Action

Submitted to: The Senate Finance Subcommittee on Fiscal Responsibility and Economic Growth
Hearing: Fiscal Outlook: 2026–2036
Hearing date: March 11, 2026

Chairman Johnson, Ranking Member Smith, and Members of the Subcommittee, thank you for the opportunity to submit a statement on the nation’s fiscal outlook. Concord Action is a nonpartisan organization committed to strengthening America’s fiscal foundations, improving the federal budget process, and engaging citizens in the work of long‑term economic stewardship. The latest projections from the Congressional Budget Office (CBO), combined with recent economic developments, make clear that the United States is on a path that is not sustainable.

I. The Fiscal Outlook: A Clear and Urgent Warning

The CBO’s Budget and Economic Outlook: 2026–2036 delivers a stark message. Federal deficits are projected to rise from $1.9 trillion in 2026 to $3.1 trillion in 2036, reaching 6.7% of GDP, levels once seen only during national emergencies. Historically, deficits above 6% of GDP were rare; now they are built into the baseline even in stable economic conditions.

As these deficits compound, federal debt held by the public is projected to climb from 101% of GDP to 120% by 2036, surpassing the previous record set at the end of World War II. The United States has never carried debt this high during peacetime.

Recent policy decisions have further worsened the outlook. The 2025 reconciliation act (Public Law 119-21) added $4.7 trillion to projected deficits, administrative actions added another $0.5 trillion, and tariff changes—while reducing projected deficits, remain highly uncertain. Altogether, cumulative deficits for 2026–2035 are now $1.4 trillion higher than CBO projected just a year ago.

II. Why the Growing Debt Matters Right Now

The consequences of rising debt are not confined to the future, they are already making life more expensive for American families. Over the past several years, households have been squeezed by high inflation and sharply higher interest rates. Even as inflation has eased from the peak reached in response to pandemic-related conditions,prices have remained elevated and continue to grow faster than the Federal Reserve’s 2% target.

At the same time, interest rates have climbed. The 10‑year Treasury yield rose from around 2% in early 2022 to more than 4% in 2025, pushing mortgage rates, auto loan rates, and small‑business financing costs sharply higher. A typical mortgage payment on a median‑priced home now consumes nearly 40% of the average family’s income.

Large federal deficits are contributing to these cost of living pressures. When the government spends more than it collects, it adds to overall demand, pushing prices higher. Economic research shows that a sustained increase in the primary deficit equal to 1% of GDP can raise inflation by 0.25 to 0.80 percentage points, reducing household purchasing power by hundreds of dollars each year.

Rising debt also pushes interest rates higher. Between 2019 and 2025, debt held by the public rose from 79% to 99% of GDP, an increase estimated to have raised long‑term interest rates by about 0.8 percentage points. For a typical mortgage, that means roughly $2,400 more per year in payments. Car loans and small‑business financing have followed the same pattern.

The bottom line is clear: the growing national debt is already raising costs for families and businesses. It is making it harder to buy a home, finance a car, or start a business. Addressing the debt is not only a long‑term necessity, it is essential to easing the affordability crisis Americans face today.

III. The Long‑Term Risks: Shrinking Fiscal Space and Rising Vulnerability

Recent market events have shown how quickly borrowing costs can spike when investors lose confidence. In 2025, policy shocks, from tariff threats to the war in Iran, triggered rapid sell‑offs of Treasury bonds, pushing up interest rates almost overnight. For a nation carrying more than $30 trillion in publicly held debt, these swings are not just market turbulence, they are warnings.

For years, low interest rates masked the true cost of rising debt. But since the pandemic, interest rates have risen sharply, and interest costs have surged even though deficits have come down from the pandemic-induced highs. Between 2022 and 2025, interest payments nearly doubled as a share of federal revenue, from 9.7% to 18%, because both the debt and interest rates increased at the same time.

Looking ahead, interest costs are projected to consume an even larger share of federal resources, rising to 25% of revenue by 2034. That means more than one out of every four tax dollars could go toward interest payments alone. Credit rating agencies have already cited this trend as a major concern.

The long‑term consequence is clear: as interest costs grow, the federal government loses the flexibility to respond to new challenges, economic downturns, national security threats, or public health emergencies. Rising debt service squeezes out investments in the future and increases the risk of a financial crisis if markets lose confidence in the government’s ability to manage its obligations.

Without a course correction, interest payments could become the single largest drain on federal revenues, limiting our ability to invest in children, infrastructure, innovation, and national defense.

IV. Concord Action’s Policy Agenda: A Path to Restore Fiscal Responsibility

The fiscal outlook is serious, but it is not hopeless. The nation has the tools to change course, if policymakers are willing to act. Concord Action recommends two essential steps to restore stability, rebuild public trust, and put the budget on a sustainable path.

A. Establish a Bipartisan Fiscal Commission

A bipartisan fiscal commission is the most realistic way to break the political stalemate. Concord Action strongly supports the Fiscal Commission Act, which would:

• Bring both parties to the table
• Require a comprehensive review of the budget and tax code
• Produce a plan to stabilize the debt
• Guarantee an up‑or‑down vote in Congress

Commissions have worked before, most notably with the Base Realignment and Closure (BRAC) process in the 1980s and 1990s, and the National Commission on Social Security Reform (Greenspan Commission) in 1983. They can work again. A commission provides the structure, accountability, and political cover needed to make difficult but necessary choices.

B. Commit to a 3% Deficit‑to‑GDP Target

Concord Action also urges Congress to adopt a 3% deficit‑to‑GDP target, a goal endorsed by leading fiscal experts and consistent with international standards. A 3% target would:

• Essentially cut the deficit in half as a share of the economy
• Stabilize the debt as a share of the economy
• Reduce interest costs over time
• Restore confidence in America’s fiscal trajectory
• Provide a clear benchmark for policymakers and the public

This target does not dictate specific policy choices. It simply establishes a destination—one that is achievable with a mix of spending reforms and revenue measures.

Conclusion

The fiscal challenges facing the United States are serious, but they are solvable. The CBO’s outlook, recent market volatility, and the affordability pressures facing American families all point to the same conclusion: the nation needs a credible plan to stabilize the debt and restore long‑term fiscal health. A bipartisan fiscal commission and a commitment to a 3% deficit target offer a practical, achievable path forward. With a clear goal and a disciplined process, Congress can begin to reverse the unsustainable trajectory we are on and build a stronger fiscal foundation for future generations.

Concord Action stands ready to support this Subcommittee in advancing the reforms needed to secure America’s fiscal future.