The Congressional Budget Office just released their report, Budget and Economic Outlook: 2026 to 2036.
According to them, there have been significant developments that have impacted changes since the 2025 report was issued.
The deficit for fiscal year 2026 is projected to be $1.9 trillion, equal to 5.8 percent of gross domestic product (GDP), which is about the same in relation to the size of the economy as the 2025 deficit. By 2036 the deficit reaches $3.1 trillion, or 6.7 percent of GDP. While the federal debt held by the public grows from 99 percent of GDP at the end of 2025 to 120 percent of GDP in 2036. This is a historically significant increase.
The impact of the growing federal debt is reflected in the deficit projections through higher interest costs. Net outlays for interest go from $1.0 trillion in 2026 to $2.1 trillion in 2036, rising from 3.3 percent of GDP to 4.6 percent. Add to the rising interest payments spending on Social Security & Medicare grow faster than revenues year over year.
Why does this matter to us? While our federal debt continues to grow beyond a sustainable trajectory, this only puts more strain on our economy at a time when we need to be focused on reforming social security.
Key difference between Deficit and Debt:
- Deficit (Annual) occurs when the government spends more than it takes in (revenue) in a specific year
- Debt (cumulative) is the total amount of money the government owes to investors who purchased Treasury securities over its history
