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.
Over the coming decade, net interest costs are projected to grow at an average annual rate of 7.5%, totaling more than $16 trillion and rising as a share of GDP.
Medicare and Social Security will also see substantial growth. Medicare is expected to increase by 6.5% annually, costing $18.5 trillion over the decade, while Social Security will grow by 5.1% per year, totaling $22.5 trillion.
These figures reveal a critical reality: spending on net interest and entitlements is growing faster than the economy and producing ever larger budget deficits and interest payments.
“We are in a spiral now,” CBO Director Phill Swagel warns. “It’s a slow spiral, but it’s still a spiral of rising debt and rising payments on the debt. The situation is unsustainable.”
To break out of this spiral, Congress and the Trump administration ought to commit themselves to stabilizing — and ideally reducing —the federal debt-to-GDP ratio. Achieving this requires an economy that grows faster than the federal debt. Yet CBO projects tepid real economic growth over the coming decade, constrained by slowing labor supply growth and productivity growth.
The implications are clear. Policymakers need to do more to boost economic growth and curtail rapidly growing spending on entitlements and interest on the federal debt. And, for good measure, these steps ought to be combined with significant cuts to non-defense discretionary spending. Otherwise, the nation risks locking itself into a slow, self-reinforcing cycle of borrowing and rising debt service that will eventually lead to a fiscal crisis and hobble America’s economy.
In the end, CBO’s report, amplified by Swagel’s clear warning, is both hopeful and cautionary. It reminds us that the American economy is resilient and capable of significant growth. Yet it also warns that continued profligate federal spending will assuredly end in disaster.
James Carter is a Principal with Navigators Global. He previously served as Deputy Undersecretary for International Affairs at the U.S. Department of Labor (2006-07) and as the Director of the America First Policy Institute’s Center for American Prosperity (2021-23).
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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