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Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →U.S. federal debt grows when the government spends more than it collects and borrows to cover the difference. Four forces determine how quickly that debt rises: the gap between non-interest spending and tax receipts, the interest bill on existing borrowing, the size and composition of government programs, and the growth rate of the economy. The Congressional Budget Office (CBO) projects that, under laws in effect in early 2026, debt held by the public will remain on an upward path through 2036. Those are conditional projections, not promises about what will happen.
Start with the distinction between a deficit and debt
A deficit is a one-year flow: the amount by which federal outlays exceed receipts during a fiscal year. Debt is the accumulated stock of past borrowing. When the Treasury finances a deficit, it generally issues securities, increasing debt held by the public. Debt can also change because of cash-management operations and other financing transactions, so it is not a simple addition of every annual deficit.
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| Term | What it measures | Why it matters |
|---|---|---|
| Receipts | Taxes and other money collected by the federal government | Higher receipts reduce the amount that must be borrowed, all else equal |
| Outlays | Federal spending, including benefits, agency operations, grants and interest | Higher outlays increase borrowing when receipts do not rise enough to cover them |
| Deficit | Outlays minus receipts in one fiscal year | Shows the year’s financing need |
| Debt held by the public | Treasury securities owned by investors outside the federal government | This is the debt measure CBO uses for its headline debt-to-GDP projections |
| Gross federal debt | Debt held by the public plus Treasury securities held in federal government accounts, such as trust funds | It is a broader measure and should not be mixed with debt-held-by-the-public figures |
The most useful comparison for economic strain is often debt held by the public relative to gross domestic product (GDP). It compares a debt stock with the annual size of the economy that generates income and tax revenue.
Primary deficits show the underlying budget gap
The primary deficit excludes net interest. Treasury defines it as non-interest spending minus receipts. This measure separates current policy choices about programs and taxes from the cost of servicing borrowing accumulated in earlier years.
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The total deficit adds net interest to the primary deficit. A country can have a primary deficit even before paying interest; it can also have a primary surplus while still running a total deficit if interest costs are large enough. Tracking both measures helps explain whether debt is rising because current spending exceeds revenue, because interest has become expensive, or because of both.
Spending is the largest direct pressure when outlays outrun receipts
Every additional dollar of spending raises the deficit unless it is matched by a dollar of new receipts or an offset elsewhere. The effect depends on what is growing: mandatory benefits, health programs, discretionary agencies, emergency measures and interest have different causes and budget dynamics.
Social Security and population aging
CBO’s long-term outlook identifies Social Security as a major source of rising outlays as the population ages. More beneficiaries and a changing ratio of workers to retirees increase scheduled benefit spending. The program’s cost is influenced by demographics, benefit formulas and wage growth, while its dedicated payroll-tax receipts are affected by employment and taxable earnings.
Medicare and other health programs
Health-program spending, particularly Medicare, is another major long-term driver in CBO’s Long-Term Budget Outlook: 2025 to 2055. Per-person medical costs, enrollment and policy rules all matter. CBO’s 2026–2036 baseline also shows Social Security and Medicare pushing outlays upward as a share of GDP after 2028.
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Discretionary spending and emergency policy
Discretionary programs are funded through annual appropriations. In CBO’s 2026–2036 baseline, discretionary outlays decline as a share of GDP and partly offset growth in Social Security, Medicare and interest. That does not mean discretionary dollars necessarily fall every year; it means they are projected to become smaller relative to the economy under the laws and assumptions in the baseline.
Emergency policy can move spending sharply. Treasury’s FY 2025 Required Supplementary Information describes large primary deficits during the 2008–09 financial crisis and severe recession and again in 2020 during the pandemic downturn. Temporary aid, expanded benefits and other recovery measures increased outlays when the economy was weak. Those episodes illustrate how crises can change the deficit quickly, but they are not the sole explanation for today’s structural projections.
Revenue determines how much spending must be borrowed
Receipts are not a fixed percentage of GDP. They change with tax law, wages, profits, asset values, employment, inflation and the composition of economic activity. A new tax provision can alter receipts directly; a recession can reduce them even if tax rates are unchanged.
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CBO’s February 2026 baseline projects receipts at 17.5 percent of GDP in 2026 and 17.8 percent in 2036. In its long-term outlook, CBO says the later rise in receipts is driven mainly by higher real incomes, which increase individual income-tax receipts. These are baseline projections, not guarantees: future legislation and economic outcomes can move the tax base in either direction.
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Revenue policy and spending policy interact. If non-interest spending grows faster than receipts, the primary deficit widens. If receipts grow faster than non-interest spending, the primary deficit narrows or becomes a surplus, reducing the borrowing required before interest is paid.
Interest turns past borrowing into a current budget cost
Interest is both a consequence of earlier deficits and a force that can enlarge future deficits. CBO summarizes the mechanism this way: “The amount of the federal government’s net interest costs is mainly determined by the amount of debt held by the public and the average interest rate on that debt.” See the CBO’s Budget and Economic Outlook: 2026 to 2036.
When Treasury securities mature, they are refinanced at prevailing rates. A higher rate therefore raises costs gradually as old securities roll over, rather than repricing the entire debt in one day. More debt means that a given rate applies to a larger balance. If the government borrows to pay interest, the larger balance can generate still more interest in later years.
In CBO’s 2026 baseline, the average interest rate on publicly held debt is estimated at 3.4 percent in 2026 and rises to 3.9 percent in the final years of the 2026–2036 projection. Net interest outlays rise from 3.3 percent of GDP in 2026 to 4.6 percent in 2036. Those figures reflect CBO’s assumed path for rates, debt and refinancing; a different rate environment would produce a different result.
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Economic growth changes the denominator—and can affect the numerator
GDP growth affects debt in two directions. Faster growth can make an existing debt stock smaller relative to annual output, while slower growth can make the debt-to-GDP ratio larger. Growth also changes tax receipts and some spending, so it can alter the deficit itself.
The relationship can run the other way. CBO warns that mounting federal debt may push up borrowing costs across the economy, reduce private investment and slow output growth. That is a projected risk, not an automatic one-year rule: the effect depends on interest rates, investor demand, monetary conditions, productivity and how borrowed funds are used.
Debt-to-GDP therefore should not be read as a stand-alone forecast of living standards. It is a scale indicator that must be interpreted alongside primary deficits, interest assumptions and the economic outlook.
What CBO’s February 2026 baseline projects
The following figures come from CBO’s baseline published February 11, 2026. They reflect laws in place on January 14, 2026 and an economic forecast using information available through December 3, 2025.
| Measure | 2026 projection | 2036 projection |
|---|---|---|
| Federal deficit | $1.9 trillion | $3.1 trillion |
| Deficit as a share of GDP | 5.8% | 6.7% |
| Debt held by the public | 101% of GDP | 120% of GDP |
| Outlays | $7.4 trillion, or 23.3% of GDP | 24.4% of GDP |
| Receipts | $5.6 trillion, or 17.5% of GDP | 17.8% of GDP |
| Net interest outlays | $1.0 trillion, or 3.3% of GDP | $2.1 trillion, or 4.6% of GDP |
CBO notes that the projected deficits exceed the 3.8 percent-of-GDP average recorded over the previous 50 years. The combination of rising outlays, modestly higher receipts as a share of GDP and growing interest costs leaves borrowing on an upward path in the baseline.
Why forecasts from different agencies can disagree
Forecasts are comparable only when they use the same debt definition, fiscal year, horizon and policy assumptions. CBO’s baseline is not interchangeable with the Government Accountability Office’s current-policy simulation.
GAO reported publicly held debt of $31.3 trillion in April 2026 and, under its current-policy simulation, projects debt at 123 percent of GDP in 2036. CBO’s 2036 figure is 120 percent of GDP under its own baseline. The difference does not by itself show that one agency made an error; the analyses can use different policy baselines, economic assumptions, timing conventions and treatment of current law. GAO’s report is available in The Nation’s Fiscal Health: Urgent and Sustained Action Needed to Improve the Fiscal Outlook.
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Repair common Windows errors and clear accumulated junk for a smoother, more stable PC - no reinstall needed.Free scan · no reinstallFor longer horizons, CBO’s Long-Term Budget Outlook: 2025 to 2055 projects debt held by the public at 156 percent of GDP in 2055. That estimate is a scenario over three decades, not a statement that the ratio must reach that level. Read the full methodology at CBO’s 2025 long-term outlook.
How to evaluate a debt claim without being misled
- Identify the measure. Check whether the claim refers to debt held by the public, gross federal debt, a primary deficit or the total deficit.
- Check the time unit. A deficit is annual; debt is a cumulative balance. Do not compare a one-year flow with a stock without stating the difference.
- Check the denominator. A dollar figure and a percentage of GDP answer different questions. A rising dollar balance can coincide with a stable ratio if GDP grows quickly.
- Read the policy baseline. Determine which laws, administrative actions and judicial decisions were included and the date through which they were incorporated.
- Inspect rate assumptions. Interest costs depend on the debt balance and the average rate paid as securities mature and are refinanced.
- Separate projection from outcome. CBO’s forecast is conditional. Subsequent legislation, economic surprises or changes in rates can produce different receipts, outlays, deficits and debt.
CBO also publishes scenario analysis on interest rates and budget outcomes. Its September 24, 2026 report, Projections of Deficits and Debt Under Alternative Scenarios for Interest Rates and the Budget, is available at cbo.gov/publication/62758. Scenario analysis is useful because it shows how sensitive debt paths are to assumptions rather than presenting one path as certain.
The practical takeaway
Debt growth is not caused by a single line item. Persistent primary deficits create the borrowing balance; spending programs and revenue determine the primary gap; interest rates apply to that growing balance; and economic growth changes both the debt-to-GDP denominator and the government’s receipts and spending. The clearest analysis keeps those mechanisms separate, labels debt held by the public when using CBO’s ratios, and treats every long-range number as a conditional projection rather than a guaranteed outcome.
For the official accounting of recent deficits and the assumptions behind the 2026–2036 baseline, consult CBO’s report and Treasury’s FY 2025 Required Supplementary Information.
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