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Federal Deficits Expected to Surge as Tax Cuts Outpace Tariff Revenue
The United States’ national debt is projected to climb to $64 trillion over the next 10 years, according to a new report released Wednesday by the nonpartisan Congressional Budget Office. The sharp increase is driven in part by revenue losses linked to tax cuts enacted under President Donald Trump, the report states.
The federal deficit — the annual gap between government spending and revenue — is expected to grow from $1.9 trillion in fiscal year 2026 to $3.1 trillion by 2036, according to the CBO’s 164-page analysis.
While newly imposed tariffs are projected to generate more than $3 trillion in revenue, those gains will be more than offset by reduced tax collections stemming from Trump’s signature tax legislation.
Debt-to-GDP Ratio Set to Break Historic Records
Beyond the rising deficit, the CBO projects a significant increase in debt held by the public. Debt held by U.S. bondholders is expected to climb from 101% of gross domestic product (GDP) in 2026 to 120% by 2036.
That level would exceed the previous record of 106% set in 1946, following World War II.
Federal data shows the U.S. has already accumulated more than $37 trillion in national debt. In 2023, the CBO had estimated debt would grow by $20 trillion by the end of 2033. However, updated projections now account for Trump’s recent spending measure, which the agency says will add trillions more to the total.
The CBO serves as Congress’ independent budget scorekeeper, providing economic forecasts and cost estimates for legislation. It operates separately from the White House’s Office of Management and Budget, which oversees the president’s budget proposals.
Trump Calls for Lower Interest Rates
President Trump has repeatedly urged the Federal Reserve to cut interest rates, arguing that lower rates would reduce government borrowing costs.
“The United States of America should be paying MUCH LESS on its Borrowings (BONDS!),” Trump wrote in a social media post Wednesday.
It has been more than two decades since the federal government posted a budget surplus. The last surplus occurred in 2001. Since then, the government has spent more annually than it collects in revenue, steadily increasing the national debt.
Rising Debt Could Drive Higher Interest Rates
As the federal government issues larger volumes of Treasury bonds to finance its deficits, economists warn that interest rates could rise. Investors may demand higher yields if they perceive increased risk tied to the growing debt burden.
Concerns over fiscal sustainability have already prompted credit rating downgrades. Last May, Moody’s lowered the U.S. credit rating one notch from Aaa to Aa1. That move followed earlier downgrades by S&P in 2011 and Fitch in 2023.
With deficits widening and debt levels approaching historic highs, the CBO report underscores mounting pressure on lawmakers to address long-term fiscal stability.
For more on U.S. economics, stay tuned to Que Onda Magazine.