U.S. Debt Set to Hit Historic Levels as Deficits Top $3 Trillion, CBO Warns
The federal government’s long-term fiscal trajectory is deteriorating rapidly, according to new projections from the Congressional Budget Office (CBO). The nonpartisan agency forecasts that both the federal deficit and national debt will climb sharply over the next decade, raising concerns about sustainability and long-term economic stability.
Deficits Set to Climb Sharply Over the Next Decade
The CBO projects that the U.S. budget deficit will reach $1.9 trillion in fiscal year 2026, equivalent to about 5.8 percent of GDP. That figure is expected to remain elevated and rise steadily, hitting $3.1 trillion; or 6.7 percent of GDP; by 2036.
These persistent deficits reflect a widening gap between federal revenues and expenditures, driven by both policy decisions and underlying demographic trends.
National Debt on Track for Historic Highs
Debt held by the public is forecast to surge from 99 percent of GDP at the end of 2025 to 120 percent within the next decade. By 2030, the national debt is expected to surpass the previous record of 106 percent of GDP set in 1946.
Looking further ahead, projections suggest the debt could reach a staggering 175 percent of GDP within 30 years; levels unprecedented in U.S. history.
“Our budget projections continue to indicate that the fiscal trajectory is not sustainable,” CBO Director Phillip Swagel said in a statement.
His warning highlights growing concern among fiscal experts that current policies are placing the federal government on an increasingly precarious path.
Revenues Remain Stable Despite Rising Costs
Despite the surge in deficits, federal revenues are expected to remain relatively stable over the next decade. The CBO estimates revenues will rise modestly from 17.5 percent of GDP in 2026 to 17.8 percent in 2036.
However, spending is projected to outpace revenue growth significantly, driven by rising costs in major entitlement programs and interest payments on the national debt.
Major Policy Changes Driving the Deficit
The CBO attributes much of the fiscal deterioration to three primary factors: the “One Big, Beautiful Bill Act,” higher tariffs, and reduced immigration levels.
The sweeping tax and spending legislation signed into law during President Donald Trump’s second term is expected to increase deficits by $4.7 trillion between 2026 and 2035.
“Tax provisions including the permanent extension of provisions of the 2017 Tax Act increase deficits, as does increased spending on defense and homeland security,” Swagel continued. “Other provisions of the 2025 reconciliation act, such as changes to Medicaid and the Supplemental Nutrition Assistance Program (SNAP), reduce deficits.”
Tariffs and Immigration Policies Have Mixed Effects
Higher tariffs are projected to reduce deficits by approximately $3 trillion over the next decade, partially offsetting revenue losses from tax cuts.
As per CBO, lower immigration is expected to increase deficits by about $500 billion. A smaller population reduces the labor force and tax base, exacerbating fiscal pressures over time.
Economic Growth Expected to Slow After Initial Boost
While policy changes may provide a short-term boost to economic growth in 2026, the CBO expects real GDP growth to slow to 1.8 percent annually beginning in 2027.
“Stronger incentives to work and invest under the 2025 reconciliation act boost economic growth, while larger deficits and slower labor force growth from reduced immigration attenuate it,” Swagel noted.
Interest Costs Becoming a Major Budget Burden
One of the most alarming trends in the report is the rapid rise in interest payments on the national debt. Net interest outlays are projected to more than double; from $1 trillion in 2026 to $2.1 trillion by 2036.
By that point, interest costs alone could account for nearly one-fifth of all federal spending and approximately 4.6 percent of GDP, crowding out other priorities.
Aging Population Driving Mandatory Spending Higher
Demographic shifts are also contributing significantly to rising deficits. As the population ages, spending on programs like Social Security, Medicare, and Medicaid is expected to surge.
By 2036, mandatory spending on these programs could exceed $7 trillion annually, consuming a growing share of the federal budget before discretionary spending is even considered.
Labor Force Growth Slows as Immigration Declines
Reduced immigration is expected to shrink the U.S. population by an estimated 5.3 million people by 2035 compared to previous projections. The working-age population alone could be 2.4 million smaller than anticipated.
This slowdown is projected to reduce average monthly job growth to just 44,000 between 2028 and 2036, significantly below recent levels and further straining economic growth as per the CBO.
Public Sentiment Reflects Economic Concerns
The CBO’s report comes amid widespread public dissatisfaction with the economy. A recent poll by Pew Research Center found that 72 percent of U.S. adults rate economic conditions as fair or poor.
The data also reveals a sharp partisan divide, with significantly more Republicans expressing confidence in current economic policies compared to Democrats.
Experts Call for Urgent Fiscal Reforms
Fiscal watchdog groups are urging policymakers to act quickly.
They warn that continued borrowing at current levels will lead to higher interest costs, increased inflationary pressures, and a heavier financial burden on future generations.
Without meaningful reforms, experts caution that record-high deficits and debt could become the new normal; raising the stakes for policymakers and taxpayers alike.
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Ray Dalio Warns World Is ‘On the Brink’ of a Capital War; Says Gold Is the Safest Money
Billionaire hedge fund manager Ray Dalio is warning that global tensions are shifting beyond traditional geopolitical conflicts and entering a new era where money itself becomes a weapon. The Bridgewater Associates founder said the world is not just facing a cold war or trade war, but a looming “capital war” in which nations could use financial leverage to pressure rivals. Dalio made the remarks during an interview at the World Governments Summit in Dubai, cautioning that escalating political and economic tensions could disrupt global markets and investment flows. Dalio described a scenario where countries could attack each other by controlling the flow of capital, particularly through debt ownership and financial sanctions. Such financial warfare, he warned, could create severe market instability and alter how investors and governments manage their money.
Ray Dalio Warns World Is ‘On the Brink’ of a Capital War; Says Gold Is the Safest Money
Zillow Identifies 7 U.S. Cities Where Buyers Now Hold the Most Leverage
The real estate landscape is shifting as we enter 2026, offering new opportunities for those who have been waiting on the sidelines. According to Zillow’s latest analysis, Indianapolis has emerged as the most buyer-friendly housing market in the United States. This ranking highlights a significant trend: while coastal hubs remain financially out of reach for many, “opportunity metros” are providing home shoppers with the breathing room and affordability they need to secure long-term value.
Zillow Identifies 7 U.S. Cities Where Buyers Now Hold the Most Leverage
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John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
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