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The U.S. national debt is on track to break a record set in the aftermath of World War II within four years, while annual budget deficits are expected to rise to $3 trillion a year in 10 years, according to a new analysis from Congress’ financial watchdog.
The nonpartisan Congressional Budget Office (CBO) released budget and economic forecasts for the next decade, which projected that the federal economy budget deficits will increase from an estimated $1.9 trillion in fiscal year 2026 to $3.1 trillion in 2036.
Rising budget deficits will further push up the national debt, with gross federal debt rising from an estimated $39.4 trillion at the end of fiscal year 2026 to $63 trillion by 2036. That will also increase the size of the national debt from $32 trillion to $56 trillion over that period, and with it the public as a percentage of gross domestic product (GDP) – a measure economists prefer to use when comparing the national debt to the size of its economy.
The US national debt held by the public is estimated to rise to 108% of GDP by 2030, which would surpass the record of 106% set in 1946, when the US was in the process of demobilization after the end of World War II. In ten years, public debt as a percentage of GDP is expected to reach 120%.
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To make the budget picture even worse, the CBO estimates that the public’s debt is expected to grow faster than U.S. GDP in the coming years, which could have far-reaching implications for the country’s fiscal and economic prospects. It was explained that that was possible slow economic growth and reducing private investment while increasing interest costs to service debt.
‘The United States’ fiscal position would be more vulnerable to a rise in interest rates because the greater the debt, the more a rise in interest rates raises interest rates. debt service costs,” writes CBO.
“The risk of a fiscal crisis – that is, a situation in which investors lose confidence in the value of the U.S. government debt – would increase. Such a crisis would cause interest rates to rise abruptly and other economic and financial disruptions,” CBO continued.
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The national debt as a share of the U.S. economy is on track to exceed its post-World War II record within the next four years. (Mandel Ngan/AFP via Getty Images)
The budget watchdog added that higher inflation expectations could erode inflation the status of the dollar as the dominant international reserve currency.
Moreover, this could make lawmakers feel limited in deploying tax and spending policies in response to unforeseen events, such as stimulating the economy or strengthening the economy. national defense.
According to the CBO outlook, net interest costs are expected to rise from just over $1 trillion in fiscal year 2026, which would be 3.3% of GDP, to over $2.1 trillion in 2036, when they would be 4.6% of GDP.
Interest costs are expected to account for almost 14% of the total federal spending this year, but would rise to nearly 19% of federal spending by 2036, according to the CBO projection.
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Rising national debt and growing deficits will make it more difficult for Congress to pass tax and spending policies. (iStock)
Michael Peterson, CEO of the Peter G. Peterson Foundation, called the CBO’s latest report “an urgent warning to our leaders about America’s costly budget path.”
“Improving affordability is a top priority for the country. Borrowing trillion after trillion is taking us in the wrong direction, leading to higher interest costs and higher prices for everyday needs,” he said. “This election year, voters understand the connection between rising debt and their personal economic condition financial markets are watching.”
“Stabilizing our debt is a critical part of improving affordability and must be a core component of the 2026 campaign conversation,” Peterson added.
Maya MacGuineas, chair of the nonpartisan Committee for a Responsible Federal Budget (CRFB), said in a statement: “There are no surprises or bright spots of encouraging news here: our nation’s deficits, debt, interest payments and trust funds are all in dire shape.”
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“Fiscal leadership is not easy. “It requires us to commit not to worsen the situation by withholding support for new debt-financed legislation, by focusing on actual solutions rather than blaming, and by being prepared to make tough policy choices that will be at the heart of any serious debt deal,” she continued.
“This is too important a time for our leaders to shirk these responsibilities, and I encourage every member of Congress and the President to take a hard look at these numbers and pledge to fix our nation’s finances before it is too late,” MacGuineas added.
