U.S. deficit rises as Trump tax cuts, immigration crackdown sap revenue

President Trump’s tariffs have given Uncle Sam a boost, but the government will still run a nearly $2 trillion deficit this year, the Congressional Budget Office said Wednesday, pointing to overheated spending that far outstrips revenue coming in the door.

In just a year, Mr. Trump has rewritten significant parts of the government’s fiscal picture.

His immigration enforcement has cut the growth of the labor force, which will constrain projected economic growth, and last year’s tax cut package, which extended and expanded his original 2017 tax cuts, will limit the growth of revenue, CBO said.

But the major factor driving exploding deficits and accumulating debt is spending, which CBO said is “large by historical standards — and growing.”

CBO said the government will spend $7.4 trillion in 2026, or 23.3% of gross domestic product. The Treasury Department will collect only $5.6 trillion, leaving the nearly $2 trillion deficit.

Save for a short period at the end of the last century, the federal government has run deficits for the past 50 years. But they’ve traditionally been much smaller than they are now.

Government revenue over that time has averaged 17.3% of GDP while spending has averaged 21.2%.

This year, under Mr. Trump, revenue will be slightly higher than that average, at 17.5%, and it will remain above it, even with the new tax cuts.

Spending, however, is running much higher than average, at 23.3% of GDP this year, rising to 24.4% in a decade.

Debt held by the public will be 101% of GDP this year, rising to 120% by 2036. That would eclipse the record of 106% set just after World War II, when the U.S. went into debt to defeat the Axis powers.

It’s a steady, impending disaster, budget analysts said.

“There are no surprises here or bright spots of encouraging news: Our nation’s deficits, debt, interest payments and trust funds are all in terrible shape,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

The Peter G. Peterson Foundation said things could even be worse than CBO said if interest rates don’t adhere to the agency’s “rosy projections.”

Foundation CEO Michael A. Peterson said the issues are “structural factors”: an aging population getting more services, rising health care costs, massive interest payments on the debt already piled up, and revenue that doesn’t cover it all.

CBO said three big changes happened over the past year affecting government finances.

Tariffs will benefit the government to the tune of $3 trillion, with those impacts front-loaded in the early years. Over time, however, U.S. imports will slide, damping the effect.

The One Big Beautiful Bill budget law, with its tax cuts and new spending, will deepen the deficit by $4.7 trillion over the decade.

And the immigration crackdown siphons off another half-trillion dollars, CBO said.

CBO said GDP will grow 2.2% this calendar year, dropping to 1.8% next year and for the rest of the decade. That’s lower than past projections. The analysts said it was due to a slower-growing population, thanks to immigration controls.

Inflation as measured by the Consumer Price Index will drop from 3% last year to 2.8% this year, then fall to 2.3% by the end of the decade.

The unemployment rate will rise from 4.3% last year to finish at 4.6% this year, then slide back down to 4.3% by 2030.