As the world's largest economy, the U.S. government is able to afford staggering levels of borrowing, and lenders generally do not worry too much about it. However, looking ahead to the next decade, the forecast gap between U.S. Treasury Department revenues and expected expenditures may cause even the most optimistic proponents of fiscal easing to hesitate.
The U.S. Congressional Budget Office ( CBO ) released forecasts for federal fiscal revenues and expenditures under the national revenue framework for the years 2026 to 2036 this week. Economists have long been accustomed to seeing astonishing figures in the U.S. budget: the United States currently carries a debt of $40 trillion, and yet the fiscal crisis predicted by the debt hawks for many years has not materialized.
However, as the U.S. Social Security Trust Fund is expected to be depleted in a little over seven years, and the Medicare program is expected to become insolvent in six and a half years, budget issues are increasingly becoming a central focus of the political agenda and public discourse.
CBO Projections for government spending – regardless of which political party is in power – could further exacerbate these concerns. According to a report by this institution, between 2026 and 2036, the United States will spend $20.1 trillion on paying off national debt interest. This includes not only the interest corresponding to the current debt burden of $40 trillion but also the additional debt interest resulting from new deficits over the next decade.
CBO pointed out that in 2026, the U.S. Treasury Department paid $1.2 trillion in interest on national debt. By 2036, this figure is expected to increase to just under $2.5 trillion per year, which is approximately $200 billion per month.
If we consider this figure in a broader context, by 2036, the United States' defense spending is expected to reach 1.1 trillion dollars, which means that the expenditure on paying interest on loans will be approximately twice that of defense spending.
Despite the external pressure to reduce deficits – for example, some propose to control the budget deficit at GDP of 3%, rather than the current 6% to 7% – CBO predicts that the gap between fiscal revenues and expenditures will continue to widen over the next decade. The U.S. Treasury Department has confirmed that the deficit for the fiscal year 2026 is 2 trillion dollars. CBO estimates that by 2036, this figure will increase to over 3 trillion dollars. From this year to ten years from now, the cumulative budget gap will reach 25.6 trillion dollars.
A major driving factor for the continuous demand for borrowing is the increase in social welfare expenditures. Similar to many Western countries, the population in the United States is aging, which means that more people will retire from the labor market and will be more reliant on government social security and medical services. According to CBO, such expenditures amounted to 3.7 trillion dollars in 2026; by 2036, they may rise to 6.1 trillion dollars.
Growth Theory
Policymakers have put forward various ideas on how to address budget issues, and the current government has stated that tariffs could potentially become a factor in rebalancing finances.
More recently, political figures have suggested that with the additional impetus provided by artificial intelligence, the U.S. economy might be able to overcome its fiscal difficulties through growth on its own.
However, budget experts do not quite agree with this view. One of the reasons is that artificial intelligence is likely to mean that machines and robots will replace humans, which could potentially weaken a major source of government revenue: income tax.
However, Director Phil Swagel of CBO stated at an event organized by the Bipartisan Policy Center and the National Governors Association yesterday to a discussion panel that growth alone is unlikely to solve all budget problems. He said, "We have a structural budget deficit of GDP 6%, which is unprecedented... and this is despite the economy performing quite well despite headwinds; we are not involved in global conflicts, nor do we have situations like a pandemic."
He also stated, "This is a structural deficit, and it is of considerable scale; we must address it. Stronger growth would be helpful, but it is not enough. What we need is not just growth; we also require policy action."
CBO is a strictly non-partisan organization that does not make value judgments nor propose policy recommendations. Its forecasts do not predict when a financial crisis—should one indeed occur—might happen, although members of Congress might raise such questions. Swagel added, "For me, the challenge is that I cannot determine what the deadline is, or when we need to take action. That’s what the members of Congress want to know, and we don’t know. This is both a good thing and a bad thing."
On the positive side, it's much better to have time to take action compared to when a crisis breaks out immediately... But on the other hand, we ultimately have to take action at some point, and the sooner the better, in order to avoid various problems that will arise.
