The United States Congressional Budget Office (CBO) has issued a warning regarding the nation’s fiscal trajectory, increasing its deficit estimates for the next decade by $AU2 trillion. This revision is partly attributed to President Donald Trump’s 2025 tax law and immigration policies. The CBO’s report highlights the growing concerns over long-term fiscal sustainability. The Congressional Budget Office provides nonpartisan economic analysis to the US Congress. It offers budget and economic information.
Trump’s fiscal package from last July, extending his 2017 tax cuts and introducing new breaks, is projected to add $AU7.1 trillion to deficits over the next 10 years, according to the CBO. Furthermore, the administration’s immigration enforcement measures are anticipated to contribute an additional $AU750 billion to the deficit. These losses are expected to outweigh the revenue generated from Trump’s import duties, which have significantly increased the average effective tariff rate.
While the CBO projects that increased tariff revenue will reduce deficits by $AU4.5 trillion, net outlays on interest are expected to push deficits even higher. Interest expenses are forecast to rise from $AU1.5 trillion in 2026 to $AU3.2 trillion in 2036, driven by the substantial debt and elevated average interest rates. The CBO anticipates stronger US economic growth this year, estimating a rate of 2.2 per cent, an increase from the 1.8 per cent projected in January of last year.
However, the CBO forecasts a moderation in growth to 1.8 per cent in 2027 and 2028, with the rate remaining at that average through 2036. This projection falls short of the 3 per cent growth target set by Treasury Secretary Scott Bessent. Trump has expressed optimism about achieving a 15 per cent or higher growth rate once his nominee for chairman of the Federal Reserve is confirmed.
