The February 2026 CBO Baseline: What It Says (and What It Means)

Why It Matters

The projection underscores mounting fiscal pressure that could force significant cuts to entitlement programs and elevate borrowing costs, directly affecting households, investors, and the broader economy.

Key Takeaways

• National debt to GDP projected at 120% by 2036
• Annual deficits averaging $2‑2.5 trillion over next decade
• Social Security trust fund exhaustion could cut benefits 25‑28% by 2032
• Net interest spending will become second‑largest budget item, surpassing defense
• One Big Beautiful Bill adds roughly $2 trillion to deficits

Summary

The webinar presented the Congressional Budget Office’s February 2026 baseline, outlining the projected trajectory of the federal budget and economy over the next decade assuming current laws remain unchanged.

CBO warns that debt held by the public will climb to roughly 120 % of GDP by 2036, surpassing the post‑World War II peak. Annual deficits are expected to average $2‑$2.5 trillion, pushing total debt service to over $3 trillion by decade’s end. Net interest is set to become the second‑largest budget line, overtaking defense spending.

Specific stress points include the imminent exhaustion of the Highway Trust Fund in FY 2028 (potential 40 % cut) and the Social Security trust fund by 2032, which could trim retiree benefits by $18,400 per couple (≈25‑28 %). The One Big Beautiful Bill is projected to add about $2 trillion to deficits, while tariffs have surged from $77 billion to $400 billion in revenue.

For policymakers, the baseline signals that without legislative reforms—tax increases, spending restraints, or entitlement adjustments—fiscal sustainability will deteriorate, crowding out other priorities and raising borrowing costs. Investors and businesses should anticipate higher interest rates and tighter fiscal conditions as debt burdens intensify.

Original Description

The Congressional Budget Office (CBO)'s projections shape the fiscal debate in Washington, influencing everything from budget negotiations to tax and spending policy, and this year’s baseline arrives amid growing concerns about rising debt, deficits, and our ability to sustain such high and rising borrowing over the long term.

On February 18, 2026, the Committee for a Responsible Federal Budget hosted a virtual event, The Latest CBO Baseline: What It Says (and What It Means). The Committee's Policy Director, Chris Towner, provided an overview of the latest CBO baseline report outlining projections of the budget and economy over the next decade.

Towner walked through the key takeaways from the new baseline, including from the Committee's full analysis of the report, and what it means for policymakers and the broader fiscal outlook. Q&A from viewers online followed the presentation.

📊View the slide presentation: https://www.crfb.org/sites/default/files/media/documents/Feb%202026%20CBO%20Baseline%20Webinar%20Slide%20Deck.pdf