CBO Warns Federal Debt to Hit 120% of GDP over Next Decade/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The Congressional Budget Office projects rising federal deficits and debt over the next decade. Debt held by the public is expected to climb to 120% of GDP by 2035. Higher spending, tariffs, and policy changes are reshaping the fiscal outlook.
CBO Federal Deficit Outlook – Quick Looks
- Debt projected to rise from 101% to 120% of GDP
- 2026 deficit forecast $100 billion higher
- Total deficits through 2035 increase by $1.4 trillion
- Social Security, Medicare, and debt interest drive spending
- Tariffs add revenue but raise inflation through 2029
Deep Look: CBO Projects Worsening Federal Deficits and Rising Debt Over Next Decade
The latest 10-year budget outlook from the Congressional Budget Office paints a sobering picture for the nation’s finances, projecting steadily rising federal deficits and mounting debt through 2035.
According to the nonpartisan agency’s report released Wednesday, federal debt held by the public is expected to climb from 101% of gross domestic product (GDP) to 120% over the next decade — surpassing historical highs.
Compared with last year’s forecast, the fiscal outlook has modestly worsened, reflecting a mix of new legislation, tariff policies, and demographic pressures.
Key Drivers of Rising Debt
The CBO identifies increased federal spending as the primary force behind expanding deficits. Major cost drivers include:
- Social Security benefits
- Medicare spending
- Interest payments on existing debt
As the U.S. population ages, entitlement programs continue to expand, while higher interest rates increase the cost of servicing government borrowing.
The report estimates that the projected 2026 deficit will be roughly $100 billion higher than previously forecast. Over the full 2026–2035 period, cumulative deficits are expected to total $1.4 trillion more than earlier projections.
Impact of New Policies
The outlook incorporates major policy developments over the past year, including Republicans’ sweeping tax-and-spending package known as the “One Big Beautiful Bill Act,” expanded tariffs, and President Donald Trump’s immigration enforcement initiatives.
While higher tariffs are projected to raise approximately $3 trillion in federal revenue over the decade, the CBO also warns they could contribute to elevated inflation from 2026 through 2029.
Inflation, the report says, is not expected to return to the Federal Reserve’s 2% target until 2030.
Why Rising Debt Matters
Growing debt levels increase the government’s interest burden, diverting funds from other priorities such as infrastructure, education, and long-term economic investments.
As debt service costs expand, policymakers face difficult trade-offs between funding programs, raising revenue, or implementing spending cuts.
Jonathan Burks of the Bipartisan Policy Center described the deficits as “unprecedented for a growing, peacetime economy,” though he noted that lawmakers still have time to address the imbalance.
“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.
Limited Success of Cost-Cutting Efforts
Efforts to rein in deficits have largely centered on temporary spending caps, suspending the debt limit, and employing “extraordinary measures” to avoid breaching borrowing limits.
Earlier this year, the Trump administration launched the Department of Government Efficiency (DOGE), aiming to cut $2 trillion in waste, fraud, and abuse. However, budget analysts estimate the initiative achieved between $1.4 billion and $7 billion in savings — a fraction of its target.
Michael Peterson, CEO of the Peterson Foundation, called the CBO’s new projection “an urgent warning” for policymakers.
He argued that stabilizing the nation’s debt trajectory should become a central issue in the 2026 political campaign cycle, noting that financial markets are closely monitoring fiscal policy.
A Defining Fiscal Challenge
The CBO’s updated outlook underscores a critical reality: without significant policy changes, deficits and debt will continue to rise even in the absence of a recession or major crisis.
With borrowing costs elevated and entitlement spending accelerating, the coming decade may test Congress and the administration’s willingness to enact meaningful fiscal reforms.
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