Trump's $5.5T Tax Plan Could Derail Debt Reduction Strategy
President Donald Trump's ambitious plan to "grow out" of America's mounting debt crisis faces a significant mathematical challenge, according to new analysis from the Committee for a Responsible Federal Budget (CRFB).Speaking at the World Economic Forum on January 21, Trump outlined his strategy for tackling the federal deficit through economic growth rather than spending cuts. "Growth is the way we go from high debt to low debt," the President declared, citing his administration's deregulation agenda and the $500 billion Stargate AI data center project as catalysts for unprecedented productivity gains.However, the President's signature "One Big Beautiful Bill" (OBBB) may undermine this very strategy. The CRFB's alternative scenario analysis projects the legislation could add $5.5 trillion to federal deficits over the next decade—approximately 10% above current projections.The OBBB extends individual tax reductions from Trump's first term, introduces new deductions for tips, overtime, and auto loans, and provides businesses with 100% immediate expensing for capital investments. The bill also increases spending on immigration control and defense.Under the CRFB's baseline scenario, which assumes Congress will renew expiring provisions as historically typical, the fiscal outlook becomes increasingly dire. By 2035, federal spending would reach $10.9 trillion while revenues hit only $7.4 trillion, creating a $3.5 trillion annual deficit—nearly 8% of GDP.The federal debt would double to approximately $59 trillion, representing 134% of GDP, with interest payments alone consuming $2.5 trillion annually—22 cents of every federal dollar spent.Trump's growth strategy would require sustained economic expansion significantly above historical norms. The analysis suggests real GDP growth of 3% annually (5% including inflation) would be necessary to meaningfully impact the debt trajectory—a pace not consistently achieved since the 1990s.The Congressional Budget Office currently projects real growth of just 1.8%, citing mounting debt as a drag on economic expansion and demographic headwinds from slowing population growth. "Without immigration, the U.S. population would begin to shrink in 2033," the CBO notes, potentially complicating Trump's immigration enforcement priorities.Additional uncertainties cloud the fiscal picture. The CRFB analysis assumes Supreme Court challenges to Trump's tariff regime succeed, eliminating projected revenue gains. While the administration would likely implement alternative trade measures, the net fiscal impact remains unclear.Even under optimistic growth scenarios, the structural challenges appear formidable. The analysis underscores the tension between Trump's tax reduction agenda and his debt reduction goals, highlighting the complex arithmetic facing policymakers as federal borrowing costs continue rising.The findings, based on CRFB analysis of Congressional Budget Office data, suggest that achieving fiscal sustainability through growth alone may require economic performance well beyond recent historical precedent.
