Why It Matters
Publicly held federal debt is projected to be 101% of GDP at the end of fiscal year 2026, more than triple the 32% of GDP recorded at the end of fiscal year 2001, the last year the federal government ran a surplus, according to a new Congressional Research Service (CRS) report. The report frames the trajectory as a long-term sustainability question, saying that addressing it would likely involve reducing future deficits through tax increases, spending reductions, or a combination of the two, and it does not prescribe which path to take.
The Congressional Budget Office (CBO) projects a fiscal year 2026 deficit of $1.85 trillion, equal to 5.8% of GDP, compared with the fiscal years 1976–2025 average net deficit of 3.6% of GDP. That puts the projected deficit 2.2 percentage points above the 50-year average.
The Big Picture
As of Aug. 31, total federal debt stood at $40.2 trillion, with publicly held debt at $32.4 trillion, or 80.7% of the total, and intragovernmental debt accounting for the remaining $7.8 trillion.
Net interest payments are projected at $1.039 trillion, or 3.3% of GDP, in FY2026, exceeding the fiscal years 1976–2025 average of 2.1% of GDP by 1.2 percentage points. CBO projects net interest will climb further, to 4.6% of GDP by fiscal year 2036.
CBO's February baseline, the source for the report's projections, assumes current law continues as scheduled. The report notes that subsequent developments, including a U.S. military conflict with Iran, could affect deficit and debt outcomes, without quantifying the effect.
Under CBO's current-law baseline, publicly held debt is projected to rise to 120% of GDP by fiscal year 2036 and 172% by fiscal year 2056. The report notes that either figure would exceed the highest level of federal debt recorded in the fiscal years 1940–2025 period, which was 106% of GDP in fiscal year 1946.
It describes short-term stimulus from deficit financing as the view of most economists, while noting that crowding out of private investment is more likely during periods of robust economic growth. Although the report states that real federal debt cannot increase indefinitely, it also says there are no signs that federal borrowing capacity will be exhausted in the short term.
The Bottom Line
The report's long-run projections rest on CBO's February baseline, and any policy changes enacted after that baseline was published fall outside its scope.
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