The U.S. federal deficit is expected to surge to $1.9 trillion this year due to higher government spending exceeding tax revenue. Projections indicate a growing deficit and rising national debt, driven by increased spending on mandatory programs. Congressional Republicans seek tax cuts and spending reductions, while long-term forecasts show increased interest costs and slowing economic growth.
The federal deficit is set to surge to $1.9 trillion this year as government spending outpaces tax revenue, the Congressional Budget Office (CBO) reported Friday.
The U.S. national debt, already exceeding $36 trillion, is projected to hit new records, climbing to 118% of the country’s economic output by 2035, according to the CBO’s annual “baseline” projections. These estimates guide lawmakers as they shape federal spending and tax legislation.
Drivers of Rising Debt
The CBO predicts the deficit will account for over 6% of the gross domestic product (GDP) in the current fiscal year. This trend reflects a widening gap between federal spending—estimated at $7 trillion in 2025—and projected revenue of $5.2 trillion from sources like taxes.
The deficit is expected to grow further, reaching $2.7 trillion annually over the next decade. Contributing factors include increased spending on mandatory programs such as Medicaid and Social Security, along with rising interest payments on the national debt. Meanwhile, revenue growth is not keeping pace with these expenses.
GOP Budget Proposals
The CBO report lands as congressional Republicans push for significant changes to federal fiscal policy. GOP lawmakers aim to extend the 2017 tax cuts, set to expire at the end of 2025—a move the CBO estimates would cost $4 trillion over the next decade. Republicans also plan to introduce spending cuts and explore other revenue sources, such as higher immigration fees, to offset costs.
Fiscal conservatives within the party are demanding that any new legislation avoid further deficit increases. However, top Democrats have criticized the GOP’s approach, with Rep. Brendan Boyle (D-Pa.), ranking member of the House Budget Committee, calling for “fair, responsible solutions—not more tax cuts for the wealthy.”
Long-Term Projections
Federal spending is expected to reach $10.7 trillion by 2035, accounting for over 24% of GDP. Much of this increase is attributed to rising costs for Social Security, Medicare, and interest on the national debt. The CBO projects that by fiscal 2027, interest payments as a share of GDP will reach their highest levels on record.
Within two years, the government is forecast to spend more on interest payments than on non-defense programs like education, public health, and veteran services. By the end of the decade, interest costs will also surpass military spending.
Economic Outlook
The CBO predicts U.S. economic growth will slow from 2.3% in 2024 to 1.9% in 2025, eventually stabilizing at 1.8% by 2026. This slowdown, driven by rising unemployment and moderating inflation, is expected to raise the unemployment rate to 4.4% by the end of 2026.
Assuming the Federal Reserve continues cutting interest rates through 2026 to stimulate growth, GDP is projected to expand at an average rate of 1.8% annually through 2035. During this period, unemployment is anticipated to decline gradually to 4.3%.
The CBO’s report underscores the challenges of managing the nation’s fiscal health amid mounting debt, rising interest costs, and slowing economic growth. As lawmakers grapple with these projections, the path forward remains highly contentious.
