The nonpartisan Congressional Budget Office’s 10-year outlook projects a worsening long-term United States federal deficit and rising debt, largely due to increased spending on Social Security, Medicare and debt service payments.
Compared to the CBO’s analysis this time last year, the fiscal outlook released Wednesday worsened modestly.
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The CBO said the deficit in fiscal 2026 — the first full fiscal year under President Donald Trump — would be about 5.8 percent of GDP, about where it was in 2025, when the deficit was $1.775 trillion.
But the U.S. deficit-to-GDP ratio will average 6.1 percent over the next decade, reaching 6.7 percent in fiscal 2036 — well above U.S. Treasury Secretary Scott Besant’s goal of reducing it to about 3 percent of economic output.
The latest report includes major developments over the past year, including the Republican tax and spending measure known as the “One Big Beautiful Bill Act,” higher tariffs, and the Trump administration’s crackdown on immigration, which has included deporting millions of immigrants from the U.S. mainland.
As a result of these changes, the projected deficit for 2026 is about $100bn higher, and the total deficit from 2026 to 2035 is $1.4 trillion higher, while public debt is projected to rise from 101 per cent to 120 per cent of GDP – surpassing historical highs.
Notably, the CBO says the higher rate partially offsets some of that increase by raising federal revenue by $3 trillion, but also comes with higher inflation from 2026 to 2029.
Increasing debt and debt service is important because repaying investors for borrowed money reduces government spending on basic needs such as roads, infrastructure, and education, allowing for investment in future economic growth.
CBO projections also indicate that inflation may not reach the Federal Reserve’s 2 percent target rate until 2030.
One big difference is that the CBO projections rely on significantly lower economic growth projections than the Trump administration, with real GDP growth to 2026 at 2.2 percent from the fourth quarter, down from an average of 1.8 percent for the rest of the decade.
While Trump administration officials in recent weeks have projected strong growth in the 3-4 percent range for 2026, recent estimates suggest growth could top 6 percent in the first quarter thanks to increased investment in factories and artificial intelligence data centers.
CBO’s projections assume that the tax-and-spend laws and tariff policies in early December will remain in place for a decade. The financial year of the government starts from October 1.
While revived investment tax incentives and larger personal tax refunds in 2026 have boosted that, the CBO said this has been offset by a slowdown in labor force growth due to larger fiscal deficits and lower immigration.
Jonathan Burks, executive vice president for economic and health policy at the Bipartisan Policy Center, said that “larger deficits are unprecedented for a growing, peacetime economy,” though “the good news is that policymakers still have time to correct course.”
‘urgent warning’
Lawmakers have recently addressed the rising federal debt and deficit largely through targeted spending limits and debt limit suspensions, as well as the deployment of “extraordinary measures” when the US is close to reaching its statutory spending limit, although these measures often entail new, massive spending or higher tax policies.
And Trump, early in his second term, deployed a new “Department of Government Efficiency,” which aimed to balance the budget by cutting $2 trillion in waste, fraud and abuse; However, budget analysts estimate that DOGE has cut anywhere between $1.4bn and $7bn, largely due to staff firings.
Michael Peterson, CEO of the Peterson Foundation, said the CBO’s latest budget projection is “an urgent warning to our leaders about America’s costly fiscal path.”
“In this election year, voters understand the connection between rising debt and their personal finances. And financial markets are watching. Stabilizing our debt is an essential part of improving affordability and must be a key component of the 2026 campaign conversation.”