Statement of Concord Action
Submitted to the House Committee on the Budget
Hearing: “The Best Metric to Reverse the Curse: A 3 Percent Deficit-to-GDP Path to Fiscal Sustainability”
Chairman Arrington, Ranking Member Boyle, and Members of the Committee, thank you for the opportunity to submit this statement for the record. Concord Action is a nonpartisan organization committed to promoting fiscal responsibility, strengthening the federal budget process, and restoring long-term economic stability. We write today in strong support of adopting a 3 percent deficit-to-GDP target, that would effectively cut the deficit in half, as an essential first step toward stabilizing the national debt.
The Case for a 3 Percent Deficit Target
A growing number of fiscal experts and policymakers, including Treasury Secretary Scott Bessent and financier Ray Dalio, have identified a 3 percent deficit target as a practical and economically grounded benchmark for stabilizing the federal debt. The logic is straightforward. When deficits remain below the rate of economic growth, the debt-to-GDP ratio levels off. When deficits exceed that rate, debt grows faster than the economy and the burden compounds.
Today, the United States is on the wrong side of that equation. Federal deficits are projected to average roughly 6 percent of GDP over the next decade, and debt held by the public is on track to exceed 120 percent of GDP by the mid-2030s. A 3 percent deficit target would not solve every fiscal challenge, but it would represent a meaningful course correction and a credible first step toward long-term sustainability.
Where We Are: A Budget Deep in the Red
The Congressional Budget Office projects that the budget deficit will reach $1.9 trillion in 2026 and grow to $3.1 trillion by 2036. As a share of the economy, the deficit is set to rise from 5.8% of gross domestic product (GDP) in 2026 to 6.7% in 2036.
Deficits of this size were once rare. From 1947, just after World War II, through 2008, the annual deficit NEVER exceeded 6% of GDP. Since 2008, deficits have topped that level six times, driven by the financial crisis and the pandemic. Now, even without a financial crisis or global pandemic, CBO expects deficits to average 6.1% of GDP over the next decade.
With large deficits continuing year after year, federal debt held by the public is projected to rise from 101% of GDP in 2026 to 120% in 2036. That would exceed the previous record of 106% of GDP, set in 1946 at the end of World War II. The United States has never carried debt this high during peacetime. This trajectory threatens to slow long-term growth, increase vulnerability to fiscal shocks, and reduce the federal government’s capacity to respond to future crises.
Why 3 Percent Is a Sound Initial Target
If the economy grows at roughly 3 percent annually and the deficit is held at or below that level, the debt-to-GDP ratio stabilizes. History shows that disciplined fiscal policy can produce real results. In the late 1990s, bipartisan cooperation on both spending restraint and revenue measures produced budget surpluses, strong economic growth, and a declining debt burden. A renewed commitment to a clear fiscal target can help restore that discipline.
At the same time, the 3 percent benchmark should be understood as a milepost, not a final destination. Many economists project long-term economic growth closer to 2 percent, which means stabilizing the debt may ultimately require deeper deficit reduction. Interest costs alone, now one of the fastest-growing components of the federal budget, will continue to exert pressure even if deficits fall. Over time, moving toward a balanced budget would put the nation on a far stronger footing and allow the debt ratio to decline to more manageable levels.
Dalio’s Warning: The Cost of Inaction
Ray Dalio has warned that the United States is approaching a dangerous inflection point. In recent public remarks, he compared today’s borrowing trajectory to the period preceding World War II and cautioned that when debt grows faster than income, it functions like plaque in the arteries. Dalio argues that a mix of spending restraint, revenue increases, and lower interest costs could bring the deficit down to 3 percent of GDP and significantly reduce the risk of a debt-driven economic crisis. His warning underscores the urgency of adopting a credible fiscal target before market pressures force far more painful adjustments.
Conclusion: A Compass for Fiscal Sustainability
A 3 percent deficit target is not a silver bullet, but it is a strong and achievable first step toward restoring fiscal stability. It would signal seriousness, impose discipline, and begin to align federal policy with economic reality. Most importantly, it would help rebuild public trust by demonstrating that policymakers are willing to confront the nation’s structural fiscal challenges.
America has charted a responsible fiscal course before, and with clear goals and bipartisan commitment, it can do so again. Concord Action urges the Committee to advance a 3 percent deficit-to-GDP target as part of a broader strategy to stabilize the national debt and secure the nation’s long-term economic strength.
Thank you for the opportunity to submit this statement.
