U.S. Faces $22.7 Trillion Deficit by 2035, CRFB Warns

The Committee for a Responsible Federal Budget (CRFB) has released a new forecast projecting that U.S. federal budget deficits will total $22.7 trillion from 2026 to 2035, nearly $1 trillion higher than the Congressional Budget Office's (CBO) January estimate of $21.8 trillion. This increase is attributed to recent tax and spending legislation, new tariffs, and other policy changes enacted since President Donald Trump took office.

The CRFB forecasts a $1.7 trillion deficit in fiscal year 2025, slightly below earlier projections, but sees deficits rising to $2.6 trillion by 2035. Notably, the "One Big Beautiful Bill Act" (OBBBA) is expected to cost $4.6 trillion over a decade, while Trump's tariffs are projected to generate $3.4 trillion in revenue. Interest payments on the national debt are forecast to total $14 trillion by 2035. An alternative scenario that includes tariff rollbacks and extended tax cuts could increase the deficit by nearly $7 trillion, pushing the debt-to-GDP ratio to 134% by 2035.

Signed into law on July 4, 2025, the OBBBA is a comprehensive tax and spending bill that has significantly impacted the federal budget. Key provisions include:

Tax Reforms:

• Permanent extension of the 2017 Tax Cuts and Jobs Act provisions.
• Increase in the standard deduction to $15,750 for singles and $31,500 for joint filers in 2025, with an additional $6,000 for those over 65.
• Introduction of "Trump Accounts" for newborns, providing tax-advantaged savings.
• New deductions for tips, overtime, seniors, and expanded child-care deductions, effective from 2025 through 2028.

Spending Cuts:

• Reduction of over $1.2 trillion in federal spending, primarily from Medicaid and the Supplemental Nutrition Assistance Program (SNAP).
• Implementation of work requirements for Medicaid recipients aged 19 to 64, mandating at least 80 hours of work per month.
• Establishment of a $50 billion Rural Hospital Fund to support healthcare providers in rural areas.

Border Security:

• Allocation of $170 billion for border security, aiming to deport up to one million people annually.
• Significant increases in funding for Immigration and Customs Enforcement (ICE), including $46.5 billion for building a wall on the U.S.-Mexico border.

The OBBBA is projected to add approximately $2.8 trillion to the national debt by 2034. Interest payments on the national debt are forecast to total $14 trillion by 2035.

Short-term GDP growth is expected to average 0.2 percentage points per year from 2025 to 2027. However, long-term projections indicate a slowdown, with GDP projected to be more than 3% smaller by 2054 compared to a scenario without the bill. Additionally, the 10-year Treasury yield is anticipated to increase by 1.4 percentage points by 2054 due to higher debt levels.

The OBBBA's tax cuts are expected to provide an average federal tax cut of $3,752 in 2026, with higher-income areas receiving more significant benefits. For example, Teton County, Wyoming, is projected to receive an average cut of $37,373. However, potential loss of health insurance coverage for 10.9 million Americans due to Medicaid cuts and work requirements raises concerns. Significant cuts to social programs like Medicaid and food assistance could disproportionately affect lower-income Americans, potentially outweighing the benefits of the tax breaks for them.

The OBBBA represents one of the most substantial tax and spending reforms in recent U.S. history. While previous administrations have enacted significant tax cuts or spending increases, the combination of extensive tax reductions with substantial spending cuts and increased tariffs is unprecedented. The long-term projections of increased debt and interest payments raise concerns about fiscal sustainability and economic growth.

As the nation grapples with these fiscal challenges, policymakers face the task of balancing economic growth initiatives with the imperative of maintaining fiscal responsibility to ensure long-term economic stability and social welfare.