House Bill Would Put 3% Deficit Far Out of Reach

Treasury Secretary Scott Bessent has frequently discussed the importance of reducing annual deficits to 3 percent of Gross Domestic Product (GDP) – which would be enough to stabilize and reduce the debt relative to the economy. Unfortunately, the House reconciliation bill – the One Big Beautiful Bill Act – would increase deficits significantly and put the 3 percent deficit target further out of reach.

In Fiscal Year (FY) 2027, we estimate the House reconciliation bill would boost deficits to about 7.0 percent of GDP, which is more than double Bessent’s proposed fiscal target, 1.8 percent of GDP above current law, and 0.7 percent of GDP higher than a simple extension of the Tax Cut and Jobs Act’s (TJCA) individual provisions.

The deficit would remain around that level through 2034 under the bill as written, and it would rise further to 7.8 percent of GDP by 2034 if arbitrary expirations are cancelled and the bill is made permanent.

Importantly, Bessent has called for achieving the 3 percent of GDP deficit target both through deficit reduction and through stronger GDP growth.

Most analyses have found that the House bill or similar proposals would have either a modest positive or modest negative effect on output and would not meaningfully change the annual growth rate. Yet even with the concurrent budget resolution's assumptions of 2.6 percent average real annual growth – which is quite optimistic in the near term and highly unrealistic over a decade – deficits would remain well above the 3 percent target.

Assuming 2.6 percent real annual growth – about 50 percent higher than the expected growth rate – the deficit will still total an alarming 6.6 percent of GDP in 2027. It would fall to 5.4 percent of GDP in 2034 only if large parts of the House bill expired and the rapid unrealistic growth continued. On a permanent basis, deficits would still total 6.3 percent of GDP in 2034 – more than twice the 3.0 percent target – even with unrealistic growth assumptions.

Reducing deficits to 3 percent of GDP is both an admirable goal and a necessary step toward ensuring long-term fiscal sustainability. Unfortunately, the House bill will move us further away from that goal rather than closer to it. Instead, lawmakers should pair a pro-growth extension of Tax Cuts and Jobs Act provisions with credible offsets. Doing so would help reduce near-term inflationary pressures, lower borrowing costs, and calm market jitters.