MNI BRIEF: CBO Projects Rising US Deficits On Interest Costs

The nonpartisan Congressional Budget Office warned again Wednesday that the U.S. is on an unsustainable fiscal path, increasing its estimate of the 10-year deficit by USD1.4 trillion as rising rising interest costs boost the shortfall. 

"The deficit for fiscal year 2026 is projected to be USD1.9 trillion, equal to 5.8% of gross domestic product (GDP), which is about the same in relation to the size of the economy as the 2025 deficit," CBO director Phill Swagel said in a statement. "Deficits from 2026 to 2035 are projected to total USD23.1 trillion, which is USD1.4 trillion (or 6%) more than in CBO's January 2025 baseline."

By 2036, in the current baseline, the deficit reaches USD3.1 trillion, or 6.7% of GDP. "Those sustained large deficits are historically unusual, given that the unemployment rate is projected to remain below 5%," he said. 

Revenues are roughly stable in relation to the size of the economy, rising to 17.8% in 2036 from 17.5% of GDP in 2026. Higher tariffs will reduce deficits by about USD3 trillion over the 10-year period but are also expected to contribute to higher prices for consumer and capital goods and potentially reduce output by decreasing investment and productivity, the CBO said.

Outlays increase to 24.4% of GDP from 23.3% of GDP over the next decade as spending on Social Security, Medicare, and interest payments grows faster than output. Net outlays for interest rise to USD2.1 trillion in 2036 from USD1.0 trillion in 2026, or 4.6% of GDP from 3.3%. 

Trump’s signature fiscal package, which extended his 2017 tax cuts and adds a number of new breaks, is estimated to increase deficits by USD4.7 trillion over the next 10 years, the CBO said. The cost of the administration’s immigration enforcement actions are expected to add USD500 billion, the report said.