By Demian Brady, National Taxpayers Union Foundation

‍Introduction

The Congressional Budget Office this week released its annual Budget and Economic Outlook, and, yet again, the numbers should raise red flags for lawmakers. Year to year, the projections may change at the margins, but the trajectory remains the same: rising spending, persistent trillion-dollar deficits, and a national debt climbing further into uncharted territory.

It is a fiscal déjà vu that should serve as a wake-up call for Congress. Lawmakers recently enacted the One Big Beautiful Bill Act (OBBBA) which included pro-growth tax policies while also allowing taxpayers to keep more of their hard-earned income. Preserving those tax cuts now requires serious attention to the other side of the ledger: federal spending. Without structural reforms, the budget math will continue to overwhelm even the strongest revenue performance.

Revenues and Outlays

Under the new baseline, revenues grow steadily in nominal terms from $5.2 trillion in 2025 to $8.3 trillion by 2036, or about 3.9% per year. CBO projects $70.2 trillion in total federal revenues over that ten year period. As a share of the economy, revenues remain remarkably stable, hovering between 17.2% and 17.8% of GDP throughout the projection window—right in line with historical averages.

Spending tells a different story.

Total outlays rise from $7.0 trillion in 2025 to $11.4 trillion by 2036, or about 4.1% per year. Over the 2027–2036 period, Washington is projected to spend $94.6 trillion—more than $24 trillion higher than projected revenues. As a share of GDP, spending climbs from 23.1% in 2025 to 24.4% by 2036.

The composition of spending also matters:

• Mandatory spending rises from $4.2 trillion to $7.0 trillion from FY 2025 to 2036, or about 4.5% per year. The category increases from 13.7% to 15.0% of GDP.
• Discretionary spending increases from $1.87 trillion to $2.24 trillion, or under 2% per year. The category gradually declines as a share of GDP, falling from 6.2% to 4.8%.
• Net interest nearly doubles, from $970 billion in 2025 to $2.1 trillion in 2036.

The takeaway is straightforward: even if discretionary spending is restrained, automatic spending growth and interest costs continue pushing total outlays higher.

Annual Deficits: Trillion-Dollar Red Ink as Far as the Eye Can See

Because spending consistently exceeds revenues, deficits remain entrenched throughout the budget window, rising from $1.8 trillion in 2025 to more than $3.1 trillion by 2036.

As a share of GDP, deficits are expected to fluctuate between 5.6% and 6.7%. In the past, deficits of this magnitude were generally associated with wars, recessions, or national emergencies. Under this baseline projection, they become the new norm, even during periods of projected economic growth.

Cumulatively, deficits will add $24.4 trillion to the national debt between 2027 and 2036 alone. As a result, debt held by the public climbs from roughly 99% of GDP in 2025 to about 120% of GDP by 2036.

Interest costs then compound the problem. As debt accumulates, interest payments rise automatically, consuming a growing share of the budget and requiring additional borrowing. What begins as structural overspending evolves into a self-reinforcing cycle of debt and debt service. Interest on the $38 trillion national debt already exceeds defense spending. By 2036, interest will soak up 1 out of every 4 dollars of tax revenue collected.

High and rising debt leaves lawmakers with fewer fiscal options in the event of a downturn, geopolitical crisis, or natural disaster. It also increases the risk that interest rates remain elevated, further worsening the fiscal outlook. At some point, debt service crowds out core national priorities.

Reforms to Restore Fiscal Discipline

CBO’s dire projections should emphasize the need for a clear fiscal reform to set the budget on a sustainable path. One constructive benchmark is the 3 Percent Deficit-to-GDP Resolution (H.Res. 981), introduced by Representatives Bill Huizenga (R-MI) and Scott Peters (D-CA), to limit deficits to no more than 3% of GDP. This could be achieved through a mix of pro-growth policies and spending restraint.

At the same time, Congress should pursue reforms to improve budget transparency and accountability. In written testimony submitted to the House Budget Committee last November, NTU Foundation listed 30 reforms related to improved scorekeeping and budgeting, including:

• Restore regular order in the budget process: Return to timely authorizations and appropriations through the committee process rather than relying on omnibus bills and continuing resolutions, improving oversight and forecast accuracy.
• Require more consistent dynamic analysis for major legislation:  The Congressional Budget Office Oversight Act (H.R. 9714), introduced by Rep. Ralph Norman (R-SC), would require CBO’s Director to annually attend House and Senate Budget Committee hearings to formalize oversight. Regimented oversight would enable lawmakers to examine recent budget estimates and make more informed budgetary decisions.
• Incorporate debt service costs in official estimates: Rep. Michael Cloud’s (R-TX) Cost Estimates Improvement Act (H.R. 991) would require the accounting of debt service costs in CBO’s official scores. Filling this gap in bill cost estimates would provide lawmakers a better understanding of the implicit costs of proposed bills.
• Expand fair-value accounting for federal credit programs: The Fair-Value Accounting and Budget Act of 2025 (H.R. 1388) from Rep. Ralph Norman (R-SC) would standardize fair-value accounting. Thus, enhancing the transparency and accuracy of federal credit programs.
• Exclude emergency and supplemental spending from the baseline: The Stop the Baseline Bloat Act (H.R. 3912) by Rep. Glenn Grothman (R-WI) would implement this reform to prevent temporary spending from becoming a permanent fixture in the budget.
• Require CBO to provide baseline updates consistently: The Increasing Baseline Updates Act (H.R. 6470) would require more frequent baseline updates to ensure lawmakers rely on timely and accurate fiscal projections.
• Make CBO show more of its work: CBO has emphasized transparency in its modeling and data, but the CBO Show Your Work Act (H.R. 724), re-introduced by Rep. Warren Davidson (R-OH), would increase the transparency of scorekeeping by requiring CBO to provide more information about its data and modeling so that external experts could replicate its work.
• Incorporate duplication risk into cost estimates: The bipartisan Duplication Scoring Act (S. 2733), introduced by Senators Rand Paul (R-KY) and Maggie Hassan (D-NH), would strengthen CBO’s scoring methodology to identify proposals that are duplicative of existing federal programs.
• Increase transparency through post-enactment reviews: Rep. Andy Barr’s (R-KY) CBO Scoring Accountability Act (H.R. 2666) would require CBO to publish follow-up analyses of major legislation after it has been enacted into law, to compare CBO’s original estimate with actual fiscal outcomes.
• Require program reauthorization when CBO estimates prove inaccurate: Projecting cost estimates for complex legislation generally entails a degree of uncertainty. A proposal would trigger a reauthorization vote for mandatory spending programs when actual outlays exceed CBO’s estimate by a certain percentage.

Honest budgeting is a prerequisite to sustainable budgeting.

Conclusion

CBO’s grim budget outlook releases may start to feel like an annual routine, but they should not be treated as such. Deficits near 6% of GDP, debt climbing toward 120% of the economy, and interest costs consuming a growing share of the budget are unsustainable, dangerous trends.

If lawmakers want to preserve economic growth, protect recent tax relief, and avoid saddling future generations with even heavier burdens, serious spending restraint can no longer be postponed.

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Demian Brady is the Vice President of Research for the National Taxpayers Union Foundation (NTUF).

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