Washington – A surprising bipartisan consensus is building in Washington around a seemingly simple goal: reducing the federal deficit to 3% of Gross Domestic Product (GDP). What began as a resolution introduced by members of the Bipartisan Fiscal Forum on January 9th is gaining traction with influential figures across the political spectrum, from hedge fund titan Ray Dalio to former President Trump’s Treasury Secretary, Scott Bessent. This shift comes as concerns mount over the rapidly deteriorating fiscal outlook for the United States, with the national debt now projected to reach unsustainable levels.
The call for a “3% solution” to the national debt isn’t a detailed legislative plan, but rather an aspirational target. It doesn’t outline specific spending cuts or tax increases, but instead focuses on a measurable goal – halving the current gap between government revenues and outlays. This simplicity, though, is proving to be its strength, attracting support from those who typically uncover themselves on opposite sides of the debate. The urgency behind this push stems from a stark reality: the U.S. Is on track to spend $7.449 trillion in fiscal year 2026 whereas collecting only $5.596 trillion in revenue, resulting in a deficit of $1.853 trillion, or 5.8% of GDP.
A Bipartisan Call to Action
The Bipartisan Fiscal Forum, a group of House members dedicated to addressing the nation’s unsustainable debt trajectory, initiated the current momentum. According to its website, the Forum’s mission is to “elevate the debt issue with their colleagues and the public while providing members of Congress with opportunities to improve the fiscal policy debate.” The group, which has engaged over 90 current members of Congress since its informal beginnings in 2020, believes that durable solutions require bipartisan support.
Beyond Capitol Hill, the idea has resonated with prominent voices in the financial world. In February, Ray Dalio, founder of Bridgewater Associates, publicly endorsed the 3% target on X (formerly Twitter), stating that “while the most responsible members of both parties don’t agree on much, they agree on this.” The editorial boards of the Washington Post and Bloomberg have likewise voiced their support, reviving long-standing calls for deficit caps from figures like Warren Buffett.
Trump’s Treasury Secretary Advocates for Fiscal Restraint
Perhaps surprisingly, Scott Bessent, Treasury Secretary under President Trump, is a vocal proponent of a more aggressive fiscal approach. Bessent has consistently advocated for a “3-3-3” program – 3% GDP growth, a 3 million barrel per day increase in oil production, and a 3% deficit as a percentage of national income, all by 2028. However, this vision appears to be at odds with the Trump administration’s current policies, which have, according to reports, moved the U.S. Further away from fiscal responsibility. President Trump, in his recent State of the Union address, touted an “economic golden age” without addressing the looming challenges of the national debt.
The Scale of the Challenge
Achieving a 3% deficit would be a monumental undertaking. The Congressional Budget Office (CBO) projects the deficit to reach 6.7% of GDP by 2036. The Commission for a Responsible Federal Budget (CRFB) suggests this estimate is likely too low, as it assumes zero growth in discretionary spending. A recent Supreme Court ruling impacting border duties is expected to reduce tariff revenue. A particularly concerning trend is the rapidly escalating cost of interest on the national debt, which is projected to more than double from $1.039 trillion in 2026 to $2.144 trillion in 2036, becoming the second-largest expense in the federal budget after Social Security.
To reduce the deficit by roughly one-third, from $2.144 trillion to $1.40 trillion by 2036, would require significant action. One potential path, according to analysis of CBO data, would involve raising income and payroll taxes by 12% and reducing entitlement spending by 12% below current projections. Alternatively, maintaining current spending levels for the next decade – without accounting for inflation – would be necessary to reach the 3% target, a scenario considered highly unlikely.
A Familiar Framework: PAYGO
The U.S. Isn’t without precedent for tackling deficits. From 1998 to 2001, the country experienced a period of balanced budgets, largely due to the enactment of the Budget Enforcement Act, which introduced “pay-as-you-go” (PAYGO) rules. PAYGO required that any increases in mandatory spending or tax cuts be offset by corresponding reductions elsewhere in the budget. While subsequent administrations circumvented these rules through various mechanisms, the framework demonstrated its effectiveness in controlling deficits.
However, the risk remains that inaction will lead to a more precarious situation, potentially forcing the U.S. To rely on foreign lenders and accept higher interest rates to refinance its debt. Some economists, including Paul Krugman and former House Speaker Paul Ryan, have even suggested that a national sales or value-added tax (VAT), common in Europe, might become necessary as a last resort. Such a move, however, would represent a significant shift in U.S. Fiscal policy and could lead to higher taxes for consumers.
President Trump might benefit from heeding the advice of his former Treasury Secretary. The issue of national debt and deficits gained prominence in 1992, when Ross Perot ran for president on a platform focused on fiscal responsibility. Perot’s campaign helped propel Bill Clinton to the White House. Ignoring the issue now, as Trump did in his State of the Union address, could prove to be a political misstep, particularly if voters begin to prioritize fiscal discipline as they did three decades ago.
The debate over the “3% solution” is just beginning, but it represents a crucial step towards addressing the long-term fiscal challenges facing the United States. The next key date to watch is March 19th, when the House Budget Committee is scheduled to hold a hearing on the nation’s fiscal outlook. This hearing will provide a platform for further discussion and debate on potential solutions to the growing national debt.
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