The United States national debt has reached approximately $38.4 trillion as of early January. Projections from various financial organizations indicate substantial increases over the next decade.
Both the Congressional Budget Office (CBO) and the Committee for a Responsible Federal Budget (CRFB) have released forecasts detailing a worsening budget outlook, primarily driven by proposed policy changes, tax reductions, increased spending, and rising interest expenses.
Recent Debt Growth and Historical Context
The national debt increased by an estimated $2.25 trillion between January 2025 and January 2026. Over the calendar year 2025, the debt grew by approximately $2.29 trillion.
Historically, recent administrations have overseen significant debt accumulation. President Joe Biden's administration recorded nearly $2.6 trillion in national debt growth in 2023. President Trump's administration saw almost $4.6 trillion in 2020, largely due to pandemic-related economic relief measures.
The Trump and Biden administrations collectively account for five of the six highest debt-incurring years, with debt accumulation rates approximately doubling that of the Obama administration and tripling or quadrupling that of the George W. Bush administration.
Policy Proposals and Their Projected Impact
Proposed legislation, referred to as the "One Big Beautiful Bill" (OBBB) or the "Trump 2025 Reconciliation Act," is a central factor in future debt projections. The bill includes:
- Individual Tax Reductions: Extensions of previous tax cuts and new deductions for items such as tips, overtime, and auto loans. A $6,000 deduction for individuals aged 65 and older and an increase in the Child Tax Credit are also part of the provisions.
- Corporate Tax Measures: Allows 100% immediate expensing for acquiring or developing plants, equipment, and software.
- Increased Spending: Allocations for immigration control, defense, and homeland security.
Many provisions within the OBBB are scheduled to expire, but the CRFB predicts these will likely be renewed, similar to past legislation.
Tariffs and Revenue
Former President Trump's administration has proposed using tariff revenue to address the debt. Treasury data indicates tariffs could generate an estimated $300 billion to $400 billion annually. However, this amount covers only a fraction of projected annual interest costs.
Plans to share some tariff revenue directly with households through a proposed $2,000 dividend per American could cost around $600 billion per year, potentially widening the deficit without offsetting measures.
The CBO initially projected tariffs to offset $2.7 trillion through 2035. However, a recent Supreme Court ruling negating a portion of these tariffs is expected to increase the net deficit impact beyond earlier forecasts. The CRFB's alternative scenario also considers the possibility of a Supreme Court ruling rendering the tariff regime illegal, though President Trump may seek to replace such duties.
Future Deficit and Debt Projections
Both the CBO and CRFB project significant increases in future deficits and debt:
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Impact of OBBB: The CBO estimates the OBBB will independently raise deficits by $3.4 trillion through 2035. With additional impacts from immigration enforcement curbing workforce growth and increased interest costs, the total deficit increase attributed to the OBBB could reach $4.1 trillion. The CRFB's alternative scenario, which includes the OBBB and new tariffs, projects the bill could increase total deficits by $5.5 trillion over the next decade if its provisions are renewed.
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Deficit Projections: The CBO anticipates the annual deficit to reach $2.96 trillion by 2035, or 6.2% of GDP, up from 5.8% today. The CRFB's alternative scenario forecasts a shortfall of approximately $3.5 trillion by 2035, representing almost 8% of GDP.
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National Debt Projections: Publicly held debt is projected to grow from $30.2 trillion in 2026 to $53.1 trillion by 2035, reaching 116% of GDP, according to the CBO. The CRFB's alternative scenario forecasts federal debt doubling to around $59 trillion by 2035, reaching 134% of GDP.
These figures represent higher projections than those made 12 months prior.
- Primary Deficit: Both organizations indicate a trend of increasing primary deficits (the gap between tax collections and spending on non-interest items), necessitating increased borrowing.
Rising Interest Costs
Interest costs on the national debt have become a rapidly growing federal expense.
Current and Near-Term
Net interest payments in the federal budget totaled $970 billion for fiscal year 2025 and have surpassed the $1 trillion mark for the first time, according to the CBO. The CRFB projects annual interest payments to remain at $1 trillion or more.
Future Projections
The CBO, when considering an adjusted scenario where discretionary spending rises with GDP, projects interest expense to increase from $970 billion in 2026 to $2.2 trillion by 2035, a 115% increase, or approximately 8% annually. The CRFB's alternative scenario projects interest expense could rise to over $2.5 trillion by 2035, consuming 22 cents of every dollar of outlays.
Impact of Interest Costs
By 2036, carrying costs for the national debt could nearly equal all discretionary spending and be twice the outlays for defense. Interest expense could tie with Medicare as the second-largest spending category, after Social Security.
This rise in interest costs is projected to account for the entire increase in the deficit and over half the increase in the national debt. By 2036, annual interest expense is estimated to reach $15,700 per American household, approximately $1,300 per month.
Economic Growth Outlook and Strategies
The CBO does not foresee a sustained surge in economic growth. Its estimate for Fiscal Year 2026 was increased from 1.8% to 2.2%, but it expects a subsequent decline to 1.8% annual growth for the following nine years. This outlook is attributed to factors such as a declining labor force (due to an aging population and tight immigration enforcement) and tariff policies that may reduce purchasing power. These factors could potentially offset positives from lower tax rates and AI-driven productivity gains.
Former President Trump has stated that economic growth is the primary method to address federal deficits and debt. He suggests his economic approach (deregulation, domestic manufacturing, AI advancements like the Stargate data center project) would boost productivity, leading to higher GDP and increased tax receipts, even with reduced tax rates from the OBBB.
The CRFB's alternative scenario uses the CBO's January 2025 report figure of 1.8% real GDP growth, totaling 3.8% with 2% annual inflation, which is higher than the low-2% range observed in the preceding five years.
A hypothetical scenario of 3% annual real GDP growth (5% including inflation) over the next decade suggests revenues could increase more rapidly than costs, potentially leading to smaller deficits and debt additions compared to slower growth projections.
- Under this model, by 2035, the deficit could reach $2.4 trillion (under 5% of GDP) compared to $3.5 trillion (8%) under the alternative scenario.
- Spending and revenues would approximately balance at $8.5 trillion each, potentially flattening interest expense and allowing for future surpluses and debt reduction.
However, even with 3% real growth, the U.S. would remain heavily indebted, owing approximately $53 trillion (over 100% of GDP), with interest expense totaling $2.2 trillion.
Experts suggest that 3% growth might not be sustainable long-term due to potential increases in Medicare and Social Security costs, and challenges such as current borrowing levels reducing savings for capital investment and declining labor force growth requiring significant productivity increases.
Market and Public Responses
Financial markets have observed the increased U.S. borrowing, with yields on longer-term Treasury securities rising.
Analysis from Deutsche Bank and others has described the mounting debt as a potential vulnerability for the U.S. dollar and broader economy. Rating agencies and international lenders have highlighted fiscal risks, noting widening deficits and political challenges in imposing fiscal discipline.
Polling indicates that approximately 82% of voters consider the national debt an important issue, despite divisions over solutions.