The nonpartisan Congressional Budget Office's 10-year outlook projects worsening long-term U.S. federal deficits and rising debt, driven largely by increased spending, particularly on Social Security, Medicare and debt service payments.
Compared to the CBO's analysis at this time last year, the fiscal outlook, which was released Wednesday, has deteriorated modestly.
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The CBO said the deficit for fiscal year 2026 (President Donald Trump's first full fiscal year in office) will be about 5.8 percent of GDP, about where it was in fiscal year 2025, when the deficit was $1.775 trillion.
But the US deficit-to-GDP ratio will average 6.1 percent over the next decade, reaching 6.7 percent in fiscal 2036, well above US Treasury Secretary Scott Bessent's goal of reducing it to around 3 percent of economic output.
The latest report takes into account major developments of the past year, including Republicans' tax and spending measure known as the “One Big Beautiful Bill,” higher tariffs and the Trump administration's crackdown on immigration, including the deportation of millions of immigrants from the continental United States.
As a result of these changes, the projected deficit for 2026 is about $100 billion higher, and total deficits from 2026 to 2035 are $1.4 trillion higher, while debt held by the public is projected to rise from 101 percent of GDP to 120 percent, surpassing all-time highs.
Notably, the CBO says higher tariffs partially offset some of those increases by increasing federal revenue by $3 trillion, but that also comes with higher inflation from 2026 to 2029.
Rising debt and debt service are important because paying investors for borrowed money crowds out government spending on basic needs like roads, infrastructure and education, which allow for investments in future economic growth.
CBO projections also indicate that inflation will not reach the Federal Reserve's 2 percent target rate until 2030.
One important difference is that the CBO forecasts are based on significantly lower economic growth projections than the Trump administration, pegging real GDP growth for 2026 at 2.2 percent on a fourth-quarter comparative basis, fading to an average of about 1.8 percent over the rest of the decade.
In recent weeks, Trump administration officials have projected solid growth in the range of 3 to 4 percent by 2026, with recent predictions that growth in the first quarter could exceed 6 percent amid rising investments in artificial intelligence factories and data centers.
CBO forecasts assume that the tax and spending laws and tariff policies from early December will remain in place for a decade. The government's fiscal year begins October 1.
While renewed investment tax incentives and larger individual tax refunds provide a boost in 2026, the CBO said this is tempered by the drag of higher fiscal deficits and reduced immigration that slows labor force growth.
Jonathan Burks, executive vice president of economic and health policy at the Bipartisan Policy Center, said that “large deficits are unprecedented in a growing peacetime economy,” although “the good news is that there is still time for policymakers to correct course.”
'Urgent warning'
Recently, lawmakers have addressed rising federal debt and deficits primarily through targeted spending caps and suspensions of debt limits, as well as implementing “extraordinary measures” when the United States is close to reaching its statutory spending limit, although these measures have often been accompanied by large-scale new tax or spending policies that maintain high levels of deficits.
And Trump, at the start of his second term, implemented a new “Department of Government Efficiency,” which set a goal of balancing the budget by cutting $2 trillion in waste, fraud and abuse; However, budget analysts estimate that DOGE cut between $1.4 billion and $7 billion, largely through staff layoffs.
Michael Peterson, executive director of the Peterson Foundation, said the CBO's latest budget projection “is an urgent warning to our leaders about America's costly fiscal path.”
“This election year, voters understand the connection between rising debt and their personal financial situation. And financial markets are watching. Stabilizing our debt is an essential part of improving affordability and should be a central component of the 2026 campaign conversation.”
