CBO: Federal deficits and debt to worsen over next decade

WASHINGTON (AP) — The nonpartisan Congressional Budget Office’s 10-year outlook projects worsening long-term federal deficits and rising debt, driven largely by increased spending, notably on Social Security, Medicare, and debt service payments.

Compared with the CBO’s analysis this time last year, the fiscal outlook has deteriorated modestly.

Major developments over the last year are factored into the latest report, released Wednesday, including Republicans’ tax and spending measure known as the “One Big Beautiful Bill Act,” higher tariffs, and the Trump administration’s crackdown on immigration, which includes deporting millions of immigrants from mainland U.S.

As a result of these changes, the projected 2026 deficit is about $100 billion higher, and total deficits from 2026 to 2035 are $1.4 trillion larger, while debt held by the public is projected to rise from 101% of GDP to 120% — exceeding historical highs.

Notably, the CBO says higher tariffs partially offset some of those increases by raising federal revenue by $3 trillion, but that also comes with higher inflation from 2026 to 2029.

Rising debt and debt service is important because repaying investors for borrowed money crowds out government spending on basic needs such as roads, infrastructure and education, which enable investments in future economic growth.

Congressional Budget Office projections also indicate that inflation doesn’t hit the Federal Reserve’ s 2% target rate until 2030.

Jonathan Burks, executive vice president of economic and health policy at the Bipartisan Policy Center said “large deficits are unprecedented for a growing, peacetime economy” though “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,” Burks said, “Congress and the administration should seize the opportunity to act now before the available menu of choices becomes much more painful.”

Lawmakers have recently addressed rising federal debt and deficits primarily through targeted spending caps and debt limit suspensions, as well as deploying “extraordinary measures” when the U.S. is close to hitting its statutory spending limit, though these measures have often been accompanied by new, large-scale spending or tax policies that maintain high deficit levels.

And President Donald Trump at the start of his second term deployed a Department of Government Efficiency, which set a goal to balance the budget by cutting $2 trillion in waste, fraud and abuse, however, budget analysts estimate that DOGE cut anywhere between $1.4 billion to $7 billion, largely through workforce 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.”

“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.”