CBO Forecast: US Budget Deficit to Rise with Trump Tax Cuts, Tariffs
The United States is facing a significant increase in its budget deficit, as indicated by a recent report from the Congressional Budget Office (CBO). The forecast suggests that the deficit will reach $1.853 trillion in fiscal 2026, marking a slight rise from the $1.775 trillion recorded in fiscal 2025. This trend highlights the ongoing fiscal challenges exacerbated by the economic policies implemented under former President Donald Trump.
CBO Forecast: Rising US Budget Deficit Linked to Trump’s Economic Policies
According to the CBO, the deficit for fiscal 2026 will account for approximately 5.8% of the nation’s gross domestic product (GDP). Over the next decade, the average deficit-to-GDP ratio is projected to be 6.1%, with estimates reaching as high as 6.7% by fiscal 2036. This situation starkly contrasts Treasury Secretary Scott Bessent’s goal of lowering the ratio to around 3%.
Unusual Economic Circumstances
Historically, large deficits such as these are uncommon during times of low unemployment, which is expected to remain below 5% throughout the budget window. CBO Director Phillip Swagel emphasized that sustained deficits of this magnitude are atypical during periods of economic growth.
- Projected fiscal 2026 deficit: $1.853 trillion
- Deficit as a percentage of GDP for 2026: 5.8%
- Average deficit-to-GDP ratio for the next decade: 6.1%
- Projected GDP growth for 2026: 2.2%
While the CBO maintains conservative growth projections, the Trump administration predicts higher growth rates of 3% to 4% for the same period. This discrepancy reflects differing economic assumptions, especially concerning anticipated investments in manufacturing and artificial intelligence.
Impact of Tax Policies and Spending
Trump’s economic package, referred to as “One Big Beautiful Bill,” extends tax cuts from 2017 and reduces funding for social programs like Medicaid. This legislation is expected to increase consumer spending and private investment, but it also adds significantly to the national deficit—an estimated $4.7 trillion over the next ten years due to tax cuts. Moreover, reduced immigration rates are projected to contribute an additional $500 billion to the deficit.
Despite some expected federal revenue boost from tariffs, estimated to reduce the deficit by about $3 trillion, the growth in interest payments on national debt and rising costs for Medicare and Social Security remain concerning. Interest costs alone are expected to surpass $2 trillion by fiscal 2035, nearly doubling from the current $970 billion.
Long-Term Implications for National Debt
Total public debt is anticipated to reach $56.152 trillion by 2036, which would be about 120% of GDP. In fiscal 2030, the debt-to-GDP ratio may surpass its post-World War II peak of 106%. Experts, including Jonathan Burks from the Bipartisan Policy Center, express serious concerns over the sustainability of America’s financial trajectory.
With escalating deficits and costs, America’s fiscal health faces challenges that could have long-lasting implications for economic stability. The coming years will be critical in determining how effectively the government can address these fiscal issues under ongoing economic policies.
