The Congressional Budget Office (CBO) released its budget outlook for the next decade on Tuesday, showing that the U.S. budget deficit is expected to rise to $1.853 trillion in fiscal 2026, up from $1.775 trillion in fiscal 2025. By 2036, CBO expects the deficit to grow to $3.1 trillion, or 6.7% of gross domestic product (GDP), compared to 5.8% in 2026.
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Forget margin or options. Here's how the pros trade QQQ“Our budget projections continue to indicate that the fiscal trajectory is not sustainable,” said CBO Director Phillip Swagel in a statement.
2025 Reconciliation Act Offsets Tariff Gains, Says CBO
While the Trump administration’s tariff policies are expected to generate $3 trillion in revenue by 2035, the passage of the 2025 Reconciliation Act, which permanently extended tax cuts from the 2017 Tax Act, is expected to add a staggering $4.7 trillion to the deficit. In addition, the CBO forecasts that administrative actions related to immigration will increase the 10-year deficit by $500 billion.
The nonpartisan agency expects inflation of 2.7% by the end of 2026 alongside a federal funds rate of 3.4%. It also raised its inflation projections from 2026 to 2029 to account for the effects of higher tariffs.