The United States’ budget deficit will grow in fiscal 2026, the Congressional Budget Office (CBO) has projected.
The deficit is set to be US$1.853 trillion, per the CBO’s forecast, widening from fiscal 2025’s $1.775 trillion. This is around 5.8% of the U.S.’ gross domestic product, a similar ratio to the previous year.
Since the CBO’s previous forecast in January 2025, “three major developments have affected CBO's baseline budget and economic projections: the 2025 reconciliation act [formerly known as the One Big Beautiful Bill Act], higher tariffs, and lower immigration,” wrote CBO director Phill Swagel.
The 2025 spending bill raised projected deficits by $4.7 trillion over the next decade, while lower immigration would lift deficits by $500 billion. The increase in tariffs would cut expected deficits by $3 trillion.
Deficits from fiscal 2026 to 2035 are forecast to total $23.1 trillion, rising 6% from the CBO’s projection last year. In fiscal 2036, the deficit would reach $3.1 trillion and represent 6.7% of GDP.
“Those sustained large deficits are historically unusual, given that the unemployment rate is projected to remain below 5 percent,” wrote Swagel.
Revenues would remain largely stable as a percentage of GDP, increasing from 17.5% in fiscal 2026 to 17.8% in 2036. Outlays would grow from 23.3% of GDP to 24.4%, largely due to rising spending on retirement benefits and government health insurance program Medicare.
Federal debt held by the public would increase from 99% of GDP in 2025 to 120% of GDP in 2036. By 2030, this debt would pass the all-time high of 106% reached in 1946.
Under CBO projections, inflation will ease in fiscal 2026, with the consumer price index dipping to 2.8% from 2025’s 3%. While it expects GDP growth to rise to 2.2% in 2026, this would then slow to 1.8% from 2027 onwards.
Republicans have pushed back against the CBO’s forecast, claiming GDP growth is set to be at least 3% in fiscal 2026. Other GDP projections have not matched this, however, with Goldman Sachs saying last month that it expects growth of 2.5% during the year.
