The Budget and Economic Outlook: 2026 to 2036 | Congressional Budget Office

Deficits are large by historical standards. The deficit totals $1.9 trillion in fiscal year 2026 and grows to $3.1 trillion in 2036. Relative to the size of the economy, the deficit is 5.8 percent of gross domestic product (GDP) in 2026 and increases to 6.7 percent in 2036. Deficits averaged 3.8 percent of GDP over the last 50 years (see Chapter 1).

Debt held by the public rises from 101 percent of GDP in 2026 to 120 percent in 2036, well above the previous record of 106 percent just after World War II.

Outlays are large by historical standards—and growing. They total 23.3 percent of GDP in 2026, exceeding their 50-year average of 21.2 percent. After being adjusted for shifts in the timing of certain payments, outlays remain at about that level through 2028 but then grow steadily, boosted by rising spending on mandatory programs and increasing net interest costs. Outlays in 2036 are 24.4 percent of GDP (see Chapter 3).

the cumulative deficit over the 2026–2035 period is $1.4 trillion (or 6 percent) greater (see Chapter 5). Three major policy developments contribute to those changes: The 2025 reconciliation act (see Appendix A) increased deficits by an estimated $4.7 trillion; higher tariffs reduced deficits by an estimated $3.0 trillion; and administrative actions related to immigration increased deficits by an estimated $0.5 trillion.

The law’s most significant tax changes were those that extended certain provisions of the 2017 tax act (P.L. 115-97) that had expired or were scheduled to expire after 2025. The reconciliation act lowered statutory tax rates and changed the amount of individual income subject to tax, thus reducing individual income tax liabilities for most households and for pass-through businesses (that is, businesses for which income is taxed under the individual income tax system). It also accelerated deductions for business investment and thus reduced effective marginal tax rates on that investment. (The effective marginal tax rate measures the tax burden on returns from a marginal investment—that is, one that is expected to earn just enough, after taxes, to attract investors.) The reconciliation act modified eligibility and financing for Medicaid and the Supplemental Nutrition Assistance Program (SNAP) and altered the terms of federal student loans, reducing federal spending on those programs. It also provided additional funding for defense, homeland security, and immigration-related activities.

The 2025 reconciliation act is estimated to increase total deficits over the 2025–2034 period by $4.2 trillion relative to CBO’s January 2025 baseline projections (see Table A-1).

To account for the effects of the 2025 reconciliation act, CBO increased its estimate of total deficits over the 2025–2034 period by $4.2 trillion relative to the agency’s January 2025 baseline projections (see Table A-1). That amount reflects CBO and JCT’s conventional estimate of the law’s effects on primary deficits (which exclude net outlays for interest) as well as effects of increased net outlays for interest and of budgetary feedback from macroeconomic changes. In total, the reconciliation act increases CBO’s estimate of federal debt as a percentage of GDP in 2034 by 9.0 percentage points, from 117.1 percent of GDP to 126.0 percent.