The United States is projected to run large federal budget deficits throughout the coming decade, according to the latest “Budget and Economic Outlook” report released by the Congressional Budget Office. Despite a surge in tariff revenue, the gains are expected to only partially offset revenue losses stemming from last year’s major tax legislation. The result is a fiscal path that keeps annual deficits near $2 trillion and pushes national debt to record levels relative to the size of the economy.
The projections underscore mounting concerns about the long-term sustainability of U.S. fiscal policy, even in the absence of a recession, war or major crisis.
Deficits Near $2 Trillion Annually
The CBO forecasts a federal deficit of $1.9 trillion this year, slightly higher than last year’s $1.8 trillion shortfall. That figure represents 5.8% of gross domestic product, roughly stable compared with the prior year. Over the next several years, deficits are expected to remain close to 6% of GDP before rising further in the early 2030s.
By 2033, the deficit is projected to reach 6.7% of GDP, largely driven by increasing entitlement spending for retirees. According to CBO Director Phillip L. Swagel, the current budget projections indicate that the nation’s fiscal trajectory is “not sustainable.”
Debt on Track for Historic High
The national debt, currently around 100% of GDP, is projected to climb to 120% by 2036. That would exceed the previous historical peak of 106% recorded shortly after World War II. The upward trend reflects structural imbalances between government spending and revenue collection that persist even under baseline economic conditions.
Impact of Tax Law and Tariffs
The CBO estimates that the “One Big, Beautiful Bill Act,” enacted last year as a signature tax reform, will widen cumulative deficits by $4.7 trillion over the next decade. While President Donald Trump’s trade policy is projected to generate approximately $3 trillion in additional tariff revenue, those gains do not fully offset the cost of the tax cuts.
Additionally, lower immigration rates are projected to increase cumulative deficits by roughly $500 billion over ten years, reflecting reduced labor force growth and tax contributions.
Rising Interest Costs
The cost of servicing the national debt is expected to rise sharply. Annual interest expenses are projected to reach $2.1 trillion by 2035, equivalent to 4.6% of GDP and more than double current levels. These projections assume relatively stable interest rates, with a 10-year Treasury yield of 4.3% beginning in 2027. Even modest deviations from that assumption could significantly alter fiscal outcomes.
Economic Growth Outlook
The CBO anticipates economic growth of 2.2% in the first half of this year, supported by the stimulative effects of the tax law and the conclusion of last year’s government shutdown. Growth is then expected to moderate to 1.8% annually in subsequent years.
Productivity gains from artificial intelligence are incorporated into the forecast but are estimated to contribute only 0.1 percentage point of additional annual growth. By 2036, AI-related improvements are projected to increase overall economic output by about 1%.
Conclusion
The latest CBO projections highlight a decade of elevated deficits, rising debt and increasing interest costs. While tariff revenues and near-term economic growth provide partial offsets, structural fiscal imbalances remain. Without policy adjustments, federal debt is poised to reach historic highs, intensifying debate over long-term budget sustainability.