JAMES CARTER: CBO’s Latest Report Sounds Alarm On Debt And Growth

The Congressional Budget Office’s (CBO’s) recently issued report, The Budget and Economic Outlook: 2026 to 2036, offers a sobering look at the fiscal trajectory of the United States. While the economy continues to display resilience, CBO’s projections underscore an uncomfortable truth: federal spending is outpacing economic growth, and the resulting accumulation of debt threatens fiscal and economic disaster.

The report contains a few bright spots, particularly in its assessment of President Donald Trump’s “One Big Beautiful Bill Act,” signed into law last summer. CBO estimates that the measure will increase real gross domestic product (GDP) by an average of 0.7% annually over the 2025–2034 period relative to CBO’s January 2025 baseline. Of note, CBO projects that the act will boost total business fixed investment by $1.1 trillion over the same period.

These increases in investment contribute to modest improvements in total factor productivity in the near term. The act also strengthens labor market incentives: reductions in marginal tax rates encourage people to work more hours, and the near-term boost in demand for labor leads to wage growth and a decline in the unemployment rate by 0.4 percentage points in 2026.

Yet these economic improvements do not solve the underlying fiscal challenge.

Over the 2027–2036 period, federal outlays are projected to total an astonishing $94.6 trillion, with revenues totaling a record $70.2 trillion. That means the federal government will borrow roughly 26 cents for every dollar it spends.

The primary problem is that CBO estimates nominal GDP will grow 3.9% each year on average over the decade while federal revenue and outlays grow at 4% and 4.4%, respectively. That means revenue, outlays, and budget deficits will climb ever higher as a share of GDP—a toxic trifecta.

What’s driving federal spending? In short, it’s principally net interest, Medicare, and Social Security.