WASHINGTON — The national debt is projected to increase by $23.9 trillion over the next ten years, a figure that does not account for the substantial tax cuts advocated by President-elect Donald Trump.
The Congressional Budget Office (CBO), a nonpartisan agency, unveiled its decade-long budget outlook, indicating a slightly improved situation as rising taxable incomes might ease some financial stress on the national debt. Despite this, the CBO forecasts annual budget deficits will reach approximately 6.1% of the U.S. gross domestic product by 2035. This is considerably higher than the 3.8% average observed over the past 50 years.
The report outlines challenges ahead for the upcoming Republican administration, which aims to implement tax cuts likely to exacerbate deficits unless accompanied by significant reductions in spending. Trump’s potential extension of his 2017 tax cuts, set to lapse at the end of this year, could exceed $4 trillion according to estimates, and his chosen treasury secretary nominee, Scott Bessent, cautioned that the economy risks a downturn without these cuts.
Bessent emphasized during his confirmation hearings that the United States has a “spending problem” rather than a revenue problem. CBO Director Phillip Swagel addressed reporters in a conference, highlighting that rising net interest costs significantly contribute to the deficit. According to him, in the near future, these net interest costs are expected to be comparable to discretionary spending levels, whether for defense or non-defense purposes.
The CBO also identified a persistent disconnect between the tax revenues that citizens are willing to provide and the government services they anticipate receiving. While the cumulative deficits expected between 2025 and 2034 are predicted to be $1 trillion lower than earlier estimates—largely due to expectations of rising taxable incomes—this year’s budget deficit is projected at $1.87 trillion, which is a modest decline compared to last year’s $1.91 trillion shortfall.
The deficits as a percentage of the economy are expected to decrease until 2027, fueled by an increase in tax collections outpacing spending. However, this trend may reverse as expenditures climb, driven by the demands of Social Security, Medicare, and national debt servicing. The federal government is anticipated to spend around $7 trillion this fiscal year, which represents about 23.3% of GDP.
Even though tax revenue as a share of the economy approximates the historical average over the last 50 years, government spending is on a projected rise. Discretionary spending for national security and social programs is set to reach $1.85 trillion in the upcoming year. The CBO predicts a downward trajectory for discretionary expenditures as a percentage of GDP, estimating them to drop to 5.3%, down from a five-decade average of 7.9%.
An aging population is expected to drive additional government spending primarily through programs like Social Security and Medicare, which are widely supported by the electorate. Both parties have pledged to safeguard these programs, despite indications that their current trajectories are not sustainable.
Swagel acknowledged the demographic shift, noting, “We’re already an aging society, and this transition is a significant factor in increasing mandatory outlays.” He pointed out that changes in birth rates, with women opting to have children later and in fewer numbers, contribute to the country’s aging trend.
Michael Peterson, CEO of the Peter G. Peterson Foundation, which monitors federal debt levels, urged lawmakers to avoid inducing fiscal harm as they navigate pending tax policy changes. He recommended that they reject budget tricks and rely on neutral, nonpartisan estimates similar to the CBO’s provisions.