As the largest economy on earth, the U.S. government can afford to borrow staggering amounts of money without lenders batting an eyelid. However, projections for the Treasury’s revenues versus its expected spending over the next decade would give even the most optimistic budget doves pause.
The Congressional Budget Office (CBO) this week released its projections of federal receipts and expenditures in the national income for 2026-2036. Economists are used to seeing eye-watering figures when it comes to the U.S. budget: The nation is currently running a $40 trillion debt burden and has yet to face the fiscal crisis predicted by debt hawks for many years.
However, with the trust fund for Social Security due to run out in a little over seven years, and Medicare to go insolvent in six and a half years, budget questions are pushing further up the agendas of both politicians and the public.
The CBO’s projections for government spending—irrespective of which party is in power—are only likely to add fuel to those concerns. Between 2026 and 2036, the CBO’s report suggests that $20.1 trillion will be spent on interest payments servicing the national debt. That is both on the current debt burden of $40 trillion, as well as the deficits adding to that pile over the next decade.
In 2026, the U.S. Treasury paid $1.2 trillion in interest on the debt, the CBO noted. By 2036, this increases to a little under $2.5 trillion a year—or $200 billion a month.
Putting that figure into context, the expected spend on the defense of the nation is $1.1 trillion by 2036, meaning roughly double that figure will be spent servicing borrowing.
Despite pressure to reduce deficits—with proposals to target budget shortfalls at 3% of GDP rather than the current 6% to 7%—the CBO expects the gap between revenues and expenditures to widen over the next decade. The Treasury has confirmed that the fiscal year 2026 deficit was $2 trillion. The CBO projects it will widen to more than $3 trillion by 2036. The total budget shortfall between this year and a decade from now is $25.6 trillion.
A major driver of the continued need to borrow is the increase in social benefits. The U.S., like many of its Western peers, has an aging population, meaning more people will stop working and will likely rely on state social and health services. In 2026, the spending stood at $3.7 trillion; by 2036, it will likely stand at $6.1 trillion, the CBO reports.
The growth argument
Policymakers have cycled through a range of ideas on how to address budget concerns, with the current administration suggesting tariffs could have been a gamechanger in rebalancing.
More recently, politicians have suggested that—compounded by the promise of AI—the U.S. economy could grow its way out of any fiscal concerns.
Budget experts are not so convinced by this argument, not least because AI may well mean the replacement of humans with machines and robotics, meaning that a major source of government revenue (income taxes) could potentially be reduced.
But growth alone is unlikely to solve the entire budget question, Phil Swagel, the director of the CBO, told a panel organized by the Bipartisan Policy Center and the National Governors Association at an event yesterday. He said: “We have a 6% of GDP structural budget deficit, which is unprecedented … [at] a time of the economy doing reasonably well given the headwinds, we’re not in a global conflict and so on, there’s no pandemic.”
“It’s a structural deficit, it’s large, we have to address it. Stronger growth will help, but it’s not enough. We need more than just growth, we need policy actions.”
The CBO is a strictly nonpartisan institution and does not make value judgments or policy recommendations. Its projections also don’t cast any aspersions on when a fiscal crisis—if any—might occur, though members of Congress might ask. Swagel added: “The challenge for me is I can’t say for sure what is the deadline, when do we need to act. That’s something members want to know, and we don’t know, which is both a blessing and a curse.”
“The blessing is that it’s much better to have time to act rather than having a crisis immediately … On the other hand, we have to act at some point, and the sooner we do, the better, to avoid all the problems that will arise.”