February 2026 Budget and Economic Outlook: Key Insights and Projections

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:

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Federal Spending and Revenue Growth Projections

Federal spending is expected to continue increasing over the next decade and beyond, with the most rapid growth in mandatory programs-primarily Social Security and Medicare. This growth is driven by demographic changes like an aging population and rising healthcare costs. Discretionary spending grows more moderately, limited by budget caps but boosted in areas such as infrastructure and defense modernization. Interest payments on the federal debt also contribute to spending growth.

On the revenue side, while economic growth leads to higher tax receipts, legislative changes and income distribution trends dampen revenue growth. As a result, revenues increase but not as quickly as spending, leading to ongoing budget deficits.

Here is a completed version of the table showing projected average annual growth rates (as a percentage):

| Category | 2026-2031 (%) | 2031-2036 (%) |
|———————-|—————|—————|
| Mandatory Spending | 5.3 | 5.7 |
| Discretionary Spending| 2.1 | 2.3 |
| Interest Payments | 7.0 | 8.2 |
| Total Revenues | 3.0 | 2.9 |

Note: Numbers for discretionary spending, interest payments, and total revenues are illustrative and should be replaced with actual data if available.

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Experts Urge Targeted Policy Measures to Ensure Fiscal Sustainability

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.