The Conversable Economist

US Budget Deficits: Spitting Into the Wind

The CBO’s 2026‑2036 outlook shows U.S. federal deficits as a percent of GDP climbing to levels not seen since the 2007‑09 recession. While the primary deficit is modestly declining, net interest costs are soaring, already surpassing defense spending and projected to equal all discretionary outlays by 2036. Mandatory programs continue to expand, pushing the overall deficit higher despite modest gains in tariff revenues. The report warns that without policy changes, the fiscal path will strain growth, inflation, and trade balances.