In its latest budget and economic outlook, the Congressional Budget Office (CBO), a nonpartisan federal agency, revised its cumulative deficit projection for the 2026–2035 period upward by $1.4 trillion compared with its forecast from just a year ago.
“Our budget projections continue to indicate that the fiscal trajectory is not sustainable,” CBO Director Phillip Swagel said in a statement, noting the agency’s latest projections. Under laws passed in Trump’s first year back in office, the national debt in 2030 will surpass the historic high of 106% of GDP, which it reached in 1946. Meanwhile, the balance of Social
Security’s Old-Age and Survivors Insurance Trust Fund will be exhausted in 2032, one year earlier than the CBO projected last January.
The report identifies three massive, offsetting policy developments as the primary drivers of this fiscal deterioration. The largest single contributor is the 2025 reconciliation act, which permanently extended the individual income tax rates and business investment incentives originally established by the 2017 tax act. That legislation alone is projected to increase federal deficits by $4.7 trillion through 2035.
While the administration’s implementation of higher and more frequent tariffs is expected to generate $3 trillion in revenue to partially offset those losses, the net effect of the new legislative and administrative landscape remains deeply in the red.
Demographic shifts and changes in immigration policy are also exacerbating the fiscal strain. Administrative actions taken during the administration’s first year to reduce net immigration are estimated to increase the 10-year deficit by $500 billion. This deficit increase is driven by a projected reduction in the U.S. population—estimated to be 5.3 million people smaller by 2035 than previously expected—which will lead to a significantly smaller pool of taxpayers. By 2035, the working-age population is projected to have 2.4 million fewer people than previously forecasted. This labor crunch is expected to result in average monthly payroll employment growth of just 44,000 jobs between 2028 and 2036, a dramatic slowdown compared with recent years.
A surge in interest costs on servicing the debt will be a big factor in its meteoric rise in the coming years. Net outlays for interest are projected to more than double from $1 trillion in 2026 to $2.1 trillion by 2036. By the end of that period, interest payments alone will account for 4.6% of GDP, nearly one-fifth of all federal spending. This burden is intensified by higher projected interest rates on Treasury securities, which CBO revised upward by an average of 0.4 percentage points. As an aging population further drives up costs for Social Security and Medicare, the report warns that the window for meaningful policy intervention is narrowing.
