America's Fiscal Outlook Has 'Deteriorated Modestly'

The nonpartisan Congressional Budget Office's 10-year outlook projects worsening long-term federal deficits and rising debt, driven largely by increased spending, notably on Social Security, Medicare, and debt service payments. Compared with the CBO's analysis this time last year, the fiscal outlook has deteriorated modestly, the AP reports.

• Major developments over the last year are factored into the latest report, released Wednesday, including Republicans' tax and spending measure known as the "One Big Beautiful Bill Act," higher tariffs, and the Trump administration's crackdown on immigration, which includes deporting millions of immigrants. The CBO said the mass deportations increased deficit projections by $500 billion due to the reduction in the labor force, the Washington Post reports. It estimated that the "Beautiful Bill" will add $4.7 trillion to deficits over the next decade.

• As a result of these changes, the projected 2026 deficit is about $100 billion, or 8%, higher, and total deficits from 2026 to 2035 are $1.4 trillion, or 6%, larger, while debt held by the public is projected to rise from 101% of GDP to 120%—exceeding historical highs. Michael Peterson, CEO of the Peterson Foundation, said the budget projection "is an urgent warning to our leaders about America's costly fiscal path."
• Notably, the CBO says higher tariffs partially offset some of those increases by raising federal revenue by $3 trillion, but that also comes with higher inflation from 2026 to 2029.
• Rising debt and debt service is important because repaying investors for borrowed money crowds out government spending on basic needs such as roads, infrastructure, and education, which enable investments in future economic growth, the AP reports.
• Congressional Budget Office projections also indicate that inflation doesn't hit the Federal Reserve's 2% target rate until 2030.

• Jonathan Burks, executive vice president of economic and health policy at the Bipartisan Policy Center said "large deficits are unprecedented for a growing, peacetime economy" though "the good news is there is still time for policymakers to correct course." "We encourage lawmakers to work together to explore options for raising revenue, trimming spending, and slowing the growth of the major cost drivers," Burks said, "Congress and the administration should seize the opportunity to act now before the available menu of choices becomes much more painful."
• Lawmakers have recently addressed rising federal debt and deficits primarily through targeted spending caps and debt limit suspensions, as well as deploying "extraordinary measures" when the US is close to hitting its statutory spending limit, though these measures have often been accompanied by new, large-scale spending or tax policies that maintain high deficit levels.
• President Trump at the start of his second term deployed a Department of Government Efficiency, which set a goal to balance the budget by cutting $2 trillion in waste, fraud, and abuse. Budget analysts estimate that DOGE only cut between $1.4 billion to $7 billion, largely through workforce firings.