With the Trump administration holding back key details of its budget outlook, it has been difficult to track the cumulative effect of the flurry of changes to spending and tax policy introduced over the last year. The Congressional Budget Office’s recent baseline update is therefore a welcome clarification on where things stand, although it comes with an unusual degree of uncertainty due to potential developments that remain on the horizon.

The following are some of the many important data points included in CBO’s extensive report:

• The agency’s bottom line is that the net effect of the many changes introduced over the past year has been to increase projected federal deficits over the period 2026 to 2035 (the same period covered by last year’s forecast) by $1.4 trillion. Most of the deterioration is due to an additional $1.2 trillion in net interest payments on federal borrowing. CBO’s estimates include the effects of new legislation, changing economic conditions, and other technical adjustments such as new immigration policies implemented unilaterally by the executive branch. However, the most recent bipartisan appropriation deal occurred after CBO had completed its forecast.
• Using dynamic scoring, the July 2025 “megabill” is expected to increase deficits over the period 2025 to 2034 by $4.2 trillion. The law will boost growth, and therefore federal tax receipts, which will lower future deficits by $280 billion over 10 years. However, that improvement will be more than offset by a $405 billion increase in net interest costs on federal borrowing, due to higher interest rates.
• The federal budget deficit will widen from 5.8 percent of GDP in 2026 to 6.7 percent in 2036. The primary deficit, which excludes net interest payments, will fall from 2.6 percent of GDP in 2026 to 2.1 percent in 2036, but that improvement is due entirely to an expectation of declining expenditures on appropriated accounts (from a total of 5.9 percent of GDP in 2026 to 4.8 percent in 2036). There are multiple reasons, including recent congressional action, to question whether this reduction will occur.
• With steady deficits over the coming decade and beyond, total federal debt will climb from 101 percent of GDP to 120 percent in 2036. Twenty years later, in 2056, CBO projects debt will reach 175 percent of GDP.
• CBO expects the average of annual customs receipts to be 1.0 percent of GDP over the coming decade, which reflects the administration’s unilateral tariff policies. By comparison, in 2024, customs receipts equaled just 0.3 percent of GDP. The pending Supreme Court decision on the legality of the administration’s many emergency tariff decisions may, or may not, alter this aspect of the forecast.
• The three largest entitlement programs—Social Security, Medicare, and Medicaid—continue to dominate the budget outlook. Over the period 2027 to 2036, 88 percent of all new non-interest spending (relative to a nominal freeze) is associated with rising expenditures for these programs. CBO expects spending on Social Security, Medicare, Medicaid, CHIP (the children’s health insurance program), and premium assistance under the Affordable Care Act (ACA) to reach 15.5 percent of GDP, up from 11.9 percent in 2026.
• Social Security’s retirement trust fund (for Old Age and Survivors Insurance, or OASI) is expected to be depleted of reserves in 2032. The Disability Insurance (DI) trust fund maintains a positive balance through 2036, as does Medicare’s Hospital Insurance (HI) trust fund.
• Over the period 2047 to 2056, Social Security and Medicare spending will exceed the combined value of payroll tax receipts and premiums by an average of 5.2 percent of GDP, up from 2.7 percent in 2026.
• CBO builds into its growth forecast a 0.1 percentage point boost in productivity from artificial intelligence (AI) over the period 2026 to 2036. However, with less immigration, total real GDP growth is expected to be just 1.8 percent per year through 2036. That compares with the administration’s expectation of 3.0 percent annual growth as reported in a column published in the Wall Street Journal.

There are plausible arguments for both a more optimistic and a more pessimistic forecast relative to CBO’s estimates.

As noted, CBO projects discretionary spending will fall over the coming decade which may not occur due to substantial geopolitical risks and a general rejection by Congress of the Trump administration’s proposed domestic cuts. Further, a Supreme Court ruling curtailing the president’s emergency tariff authority might lower expected receipts from customs duties, while a favorable ruling might create the risk of slower growth from an unpredictable trajectory for future tariff decisions. On the other hand, a higher-than-expected productivity boost from AI could lead to a more favorable outlook.

CBO’s updated forecast represents a degree of normalcy in a time of near total disregard for the traditional budget process. The publication by the administration of a traditional president’s budget would be another step in the right direction.