CBO Report Projects Escalating Federal Deficits and Mounting Debt
The nonpartisan Congressional Budget Office has released its latest 10-year fiscal outlook, painting a concerning picture of worsening long-term federal deficits and rising national debt. The report, issued on Wednesday, indicates a modest deterioration compared to projections from last year, largely fueled by increased government spending.
Key Drivers and Fiscal Projections
Major policy developments over the past year have been incorporated into the analysis, including the Republican-led "One Big Beautiful Bill Act," which encompasses tax and spending measures, along with higher tariffs and the Trump administration's immigration crackdown involving deportations. As a result, the projected deficit for 2026 is approximately $100 billion higher than previously estimated. Total deficits from 2026 to 2035 are now $1.4 trillion larger, with public debt expected to surge from 101% of GDP to 120%, surpassing historical peaks.
Notably, the CBO highlights that higher tariffs have partially mitigated some of these increases by generating an additional $3 trillion in federal revenue. However, this comes with a trade-off: elevated inflation rates are anticipated from 2026 through 2029. The rising debt and associated debt service payments are critical concerns, as they divert funds away from essential government investments in areas like roads, infrastructure, and education, which are vital for future economic growth.
Inflation and Economic Implications
Congressional Budget Office projections also reveal that inflation is not expected to align with the Federal Reserve's 2% target rate until 2030. This prolonged period of higher inflation could further strain the economy and complicate fiscal management. Jonathan Burks, executive vice president of economic and health policy at the Bipartisan Policy Center, emphasized the urgency of the situation, stating, "Large deficits are unprecedented for a growing, peacetime economy." He added, "The good news is there is still time for policymakers to correct course. We encourage lawmakers to work together to explore options for raising revenue, trimming spending, and slowing the growth of the major cost drivers. Congress and the administration should seize the opportunity to act now before the available menu of choices becomes much more painful."
Political Responses and Policy Measures
In recent years, lawmakers have addressed rising federal debt and deficits through measures such as targeted spending caps, debt limit suspensions, and the use of "extraordinary measures" when approaching statutory spending limits. However, these actions have often been accompanied by new, large-scale spending or tax policies that sustain high deficit levels. At the start of his second term, President Donald Trump established the Department of Government Efficiency, aiming to balance the budget by cutting $2 trillion in waste, fraud, and abuse. Budget analysts estimate that this initiative resulted in reductions ranging from $1.4 billion to $7 billion, primarily through workforce reductions.
Michael Peterson, CEO of the Peterson Foundation, issued a stark warning based on the CBO's findings, saying, "This 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 economic condition. And the financial markets are watching. Stabilizing our debt is an essential part of improving affordability, and must be a core component of the 2026 campaign conversation."
