CBO: Federal Debt on Pace for 120% of GDP by 2036, Raising the Tax Question

The Congressional Budget Office released its latest long-term outlook on February 11, 2026, projecting that federal debt held by the public will climb to 120% of GDP by 2036, a record that would surpass the prior high of 106% set at the end of World War II. The nonpartisan scorekeeper also revised its deficit projections sharply higher, citing the One Big Beautiful Bill Act (OBBBA) signed in July 2025, which permanently extended most of the 2017 tax cuts. For high earners, the report is not itself a tax proposal, but it sketches the fiscal backdrop against which any future tax legislation will be written.

What the CBO found

Debt held by the public is projected to rise from about 100% of GDP today to 120% by 2036, according to the CBO's Budget and Economic Outlook: 2026 to 2036. The federal deficit is projected at roughly $1.9 trillion in fiscal 2026 and is expected to grow to $3.1 trillion, or 6.7% of GDP, by 2036, per the Committee for a Responsible Federal Budget's summary of the report. Overall, CBO now expects deficits to run $1.4 trillion higher through 2035 than it estimated in its prior baseline.

Why the estimate jumped: OBBBA and interest costs

Two forces account for most of the increase. First, OBBBA is projected to add about $4.2 trillion to the deficit through 2034, including dynamic economic effects, an amount only partly offset by roughly $3.0 trillion in projected revenue from new tariffs through 2035, per CRFB's analysis. Second, net interest on the debt itself is now one of the fastest-growing lines in the budget: CBO projects net interest costs rising from about $1.0 trillion in 2026 to $2.1 trillion in 2036, according to the American Action Forum's review, consuming close to a fifth of all federal spending by the end of the decade.

The math behind the warning

Illustrative math, using CBO's own figures: the annual deficit is projected to grow from $1.9 trillion in 2026 to $3.1 trillion in 2036, an increase of about $1.2 trillion. Over that same span, net interest costs alone are projected to rise from $1.0 trillion to $2.1 trillion, an increase of about $1.1 trillion. In other words, roughly 90 cents of every additional dollar of red ink CBO expects by 2036 is simply the cost of servicing debt that has already been issued or is projected to be issued — a bill that comes due regardless of what future Congresses decide to do about tax rates, and one that compounds the longer it goes unaddressed.

What this means for high earners

CBO does not recommend policy, and no tax increase on high earners is currently scheduled or proposed in connection with this report. But the report puts a number on the size of the problem that any future deficit-reduction effort would need to close, and history offers a rough guide to where lawmakers have looked before: the 1990 and 1993 budget deals both raised top income tax rates, and the 2013 fiscal-cliff deal that ended a separate set of expiring tax cuts restored a higher top rate and layered a new investment-income surtax onto high earners specifically, rather than relying only on spending cuts. Because OBBBA already made most of the 2017 individual tax cuts permanent, there is no similar cliff forcing Congress's hand on income tax rates in the next few years. The more likely trigger is elsewhere: CRFB notes the Highway Trust Fund is projected to become insolvent in 2028 and Social Security's retirement trust fund in 2032, dates that create their own deadlines for Congress to find new revenue, cut benefits, or both.

the report is "an urgent warning to our leaders about America's costly fiscal path," Peterson Foundation chief executive Michael Peterson said

What to watch

Because no legislation is pending, there is nothing to act on today. The items worth tracking are the 2028 Highway Trust Fund deadline, the 2032 Social Security trust fund deadline, and CBO's next annual update, typically released in the spring, which will show whether actual deficits are running above or below this baseline. Any serious tax-writing effort tied to those deadlines would likely take direct aim at the provisions that most affect high earners: marginal rates, the SALT cap, itemized deductions and investment-income surtaxes have all been part of past deficit-reduction packages.

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