The Congressional Budget Office (CBO) has released its February 2026 Budget and Economic Outlook, providing the latest analysis on the federal government’s fiscal trajectory and economic projections. Scheduled for discussion at the Committee for a Responsible Federal Budget’s meeting on Wednesday, February 11, 2026, the report offers a detailed assessment of the nation’s budget deficit, debt outlook, and key economic indicators. Policymakers and analysts alike will be closely watching these findings as they weigh the implications for future fiscal policy and the broader economy.
CBO Projects Rising Deficits Amid Economic Uncertainty
The Congressional Budget Office’s latest projections reveal a stark increase in federal deficits over the next decade, underscoring the challenges posed by economic volatility and shifting fiscal dynamics. Despite a generally stable labor market, the CBO highlights that slow GDP growth combined with rising interest costs are key drivers pushing annual deficits beyond $2 trillion by 2031. Policymakers face mounting pressure as mandatory spending on entitlement programs continues to expand, crowding out other budget priorities.
Key factors influencing the rising deficits include:
- Increased federal borrowing costs fueled by higher interest rates
- Persistent inflation affecting social safety net expenditures
- Uncertainty around economic growth forecasts and international trade tensions
- Projected demographic shifts leading to higher Medicare and Social Security payouts
| Fiscal Year | Projected Deficit | GDP Growth (%) | Interest Payments (% of GDP) |
|---|---|---|---|
| 2026 | $1.68T | 1.9 | 2.3 |
| 2028 | $1.92T | 1.7 | 2.9 |
| 2031 | $2.15T | 1.5 | 3.4 |
Detailed Analysis of Spending Growth and Revenue Trends
Federal spending has demonstrated persistent growth over the last decade, with particular acceleration in entitlement programs and defense expenditures. According to the CBO’s latest projections, mandatory spending, especially on Social Security and Medicare, is expected to continue climbing due to demographic shifts and rising healthcare costs. Meanwhile, discretionary spending shows moderate increases, constrained by budget caps but partially offset by enhanced investment in infrastructure and national security. Key drivers behind this upward trajectory include:
- Expansion of healthcare-related outlays driven by an aging population
- Increased interest payments on rising federal debt levels
- Incremental defense modernization programs continued over the next decade
On the revenue side, the outlook is a blend of cautious optimism tempered by structural headwinds. While economic growth supports higher tax receipts, changes in the tax code combined with shifting income distributions temper the pace of revenue increases. The CBO notes that total revenues are projected to grow steadily but will not keep pace with spending, resulting in persistent budget deficits. The table below summarizes the projected average annual growth rates:
| Category | 2026-2031 (%) | 2031-2036 (%) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Mandatory Spending | 5.3 | 5.7 | |||||||||||
| Discretionary Spending | 2.1 |
| Policy Measure | Projected Deficit Reduction (2026-2036) |
Key Outcome |
|---|---|---|
| Entitlement Program Reforms | $1.2 Trillion | Slows spending growth |
| Tax Code Adjustments | $900 Billion | Increases revenues |
| Discretionary Spending Caps | $700 Billion | Limits annual expenditures |
Experts emphasize a balanced approach combining these strategies to maintain economic stability while restoring fiscal health. The consensus underscores that piecemeal solutions will be insufficient; instead, a coherent policy framework targeting multiple budget components is essential for sustainable progress.
In Conclusion
In sum, the CBO’s February 2026 Budget and Economic Outlook underscores the continuing challenges facing the federal budget, including rising deficits driven by mandatory spending and interest costs. As policymakers digest these latest projections, the report serves as a critical benchmark for informed debate on fiscal responsibility and strategies to ensure long-term economic stability. With the federal government’s financial outlook shaping decisions in the months ahead, the CBO’s analysis will remain a key resource for lawmakers, analysts, and the public alike.