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The nonpartisan Congressional Budget Office’s 10-year outlook predicts that the U.S.’s long-term deficit will worsen and the debt will rise, driven primarily by increased spending on Social Security, Medicare, and debt service.
Compared to CBO’s analysis this time last year, the fiscal outlook released Wednesday was slightly worse.
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The CBO said the deficit in 2026, President Donald Trump’s first full fiscal year in office, will be about 5.8% of GDP, about the same as in 2025, when the deficit was $1.775 trillion.
But the U.S. deficit-to-GDP ratio is expected to average 6.1% over the next decade and reach 6.7% in fiscal 2036, far exceeding Treasury Secretary Scott Bessent’s goal of shrinking it to about 3% of economic output.
The latest report takes into account major developments over the past year, including the Republican tax and spending package known as the One Big Beautiful Bill Act, increased tariffs, and the Trump administration’s immigration crackdown, including the deportation of millions of immigrants from mainland America.
As a result of these changes, the budget deficit in 2026 is projected to increase by approximately $100 billion, and the total budget deficit from 2026 to 2035 will increase by $1.4 trillion, while public debt is projected to increase from 101 percent to 120 percent of GDP, exceeding historic highs.
Specifically, CBO notes that the tariff hikes would increase federal revenue by $3 trillion, partially offsetting some of these increases, but that would also be accompanied by higher inflation from 2026 to 2029.
Increases in debt and debt servicing are important because repaying loans to investors crowds out government spending on basic needs such as roads, infrastructure, and education that enable investment in future economic growth.
CBO projections also show that inflation will not reach the Fed’s target rate of 2% until 2030.
The big difference is that the CBO’s forecast relies on much lower economic growth projections than the Trump administration, leaving real GDP growth unchanged at 2.2% in 2026 on a fourth-quarter comparative basis and declining to an average of about 1.8% over the rest of the decade.
Trump administration officials have in recent weeks predicted robust growth in 2026 in the 3% to 4% range, and recently predicted that growth could exceed 6% in the first quarter on the back of increased investment in factories and artificial intelligence data centers.
CBO’s projections assume that the tax and spending law and tariff policy in early December will continue for 10 years. The government’s fiscal year begins on October 1st.
While the return of investment tax breaks and higher personal tax refunds will provide tailwinds in 2026, this effect will be dampened by the effects of a widening budget deficit and reduced immigration, which will slow labor force growth, the CBO said.
Jonathan Birx, executive vice president for economic and health policy at the Bipartisan Policy Center, said that while “large budget deficits are unprecedented in a growing peacetime economy,” “the good news is that policymakers still have time to get back on track.”
“Emergency alert”
Lawmakers have recently addressed rising federal debt and deficits primarily through targeted suspensions of spending caps and debt limits, as well as introducing “temporary measures” when the United States approaches statutory spending limits, but these measures are often accompanied by large new spending and tax policies that maintain high deficit levels.
At the beginning of his second term, President Trump created a new Department of Government Efficiency with the goal of balancing the budget by cutting $2 trillion in waste, fraud, and abuse. But budget analysts estimate that DOGE has cut between $1.4 billion and $7 billion, primarily through employee layoffs.
Michael Peterson, CEO of the Peterson Foundation, said CBO’s latest budget projections “send an urgent warning to our nation’s leaders about the costly path ahead for America’s finances.”
“In this election year, voters understand the link between rising debt and personal financial health, and financial markets are paying attention. Debt stabilization is an essential part of improving affordability and should be a core element of the 2026 campaign debate.”
