Each year, the Congressional Budget Office (CBO) produces hundreds of official cost estimates of legislation being considered in the House and Senate, as well as reviews of bills considered under suspension and scorekeeping tabulations. These analyses calculate how proposals will impact the federal budget.
However, one key element has been missing from these official scores: they do not account for impacts on the federal debt. The ten-year cost of each dollar increase of spending now will actually be 40 percent higher than initially stated, making it essential to consider the long-term fiscal implications.
As part of the agency’s ongoing efforts to increase transparency, CBO has published a new interactive reporting tool to show how changes in spending and revenue will impact debt-service costs. The worksheet enables users to see how variations in debt-service costs affect the overall deficit, information not typically included in CBO’s official cost estimates.
For example, a $10 billion increase in spending in 2025 would ultimately result in a cost of $12 billion over five years and $14 billion over the decade when taking into account the cost to finance the federal debt. Correspondingly, a $10 billion reduction from 2025 spending levels would save that amount over the decade.
Table 1. The Ten-Year Impact on Debt Service Costs and the Federal Debt from a $10 Billion Increase in FY 2025 (in Billions) | |||||||||||
2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2025–2034 | |
Spending Increase | $10 | $10 | |||||||||
Debt Service Impacts | $0.2 | $0.4 | $0.4 | $0.4 | $0.4 | $0.4 | $0.4 | $0.4 | $0.4 | $0.5 | $4 |
Cumulative Increase in the Debt | $10 | $11 | $11 | $11 | $12 | $12 | $13 | $13 | $14 | $14 | $14 |
However, a lot of spending ends up being added to the budget each year rather than being a one-time boost. This just compounds the ultimate impacts on the debt service costs. Table 2 shows the cost of annual $10 billion in higher spending over the decade which would increase service costs $18 billion, adding a net of $118 billion to the federal debt.
Table 2. The Ten-Year Impact on Debt Service Costs and the Federal Debt from Annual $10 Billion Increase from FY 2025 through FY 2023 (in Billions) | |||||||||||
2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2025–2034 | |
Spending Increase | $10 | $10 | $10 | $10 | $10 | $10 | $10 | $10 | $10 | $10 | $100 |
Debt Service Impacts | $0.2 | $0.6 | $1.0 | $1.3 | $1.6 | $2.0 | $2.3 | $2.7 | $3.2 | $3.6 | $18 |
Cumulative Increase in the Debt | $10 | $21 | $32 | $43 | $55 | $67 | $79 | $92 | $105 | $118 | $118 |
CBO relies on interest rate projections from its Budget and Economic Outlook, data compiled to compute debt-service cost and savings based on where interest rates are expected to be over time. Assuming accurate predictions on interest rates, the new worksheet has the opportunity to offer a comprehensive view of the true costs associated with proposed legislative changes.
CBO merits serious credit for providing this user-friendly interactive worksheet to show how changes in spending will impact debt-service costs and future deficits. To take this project one step further, this information from the worksheet should be easily incorporated into CBO’s official cost projections without significantly impacting its workload. NTUF has supported this proposal, alongside other recommended reforms, as an important step in expanding transparency to taxpayers of cost estimates. Representative Michael Cloud’s (R-TX) Cost Estimate Improvement Act (H.R. 311) would make this a requirement.
As Congress is poised to consider a supplemental spending package with a reported price tag of $95 billion before the collapse of the Francis Scott Key Bridge in Baltimore, it is imperative that lawmakers assess the full cost of legislation incorporating debt interest impacts.