National Debt at $40 Trillion: Can Congress Cut the Deficit?

Why is the U.S. debt growing?

Simply put, the U.S. federal government has continued to spend more than it takes in through tax and fee revenues, resulting in annual deficits that add to our nation’s overall accumulated debt. On top of adding more debt, the U.S. must pay annual interest on existing debt. The graphs below show the U.S. annual deficit and overall debt for the last 40 years:

For 2026, the Congressional Budget Office (CBO) projects a $1.9 trillion deficit, which is 5.8% of our gross domestic product (GDP). These estimates rise to $3.1 trillion, or 6.7% of GDP, by 2036. During that time, annual interest costs alone are projected to double from about $1.0 trillion to $2.1 trillion.

Most federal spending is not reconsidered each year. Instead, mandatory federal programs such as Social Security and Medicare largely run according to formulas in existing law. In 2026, CBO estimates mandatory outlays at about $4.5 trillion and discretionary spending at about $1.9 trillion. Within the next 10 years, surpluses in both Social Security’s retirement trust fund and Medicare’s Hospital Insurance trust fund are set to run out, meaning that large deficit reductions are difficult to achieve if lawmakers rule out both major benefit changes and significant new revenue.

Why does the budget process struggle to control deficits?

These projections of higher debt and possible insolvency for some government programs are not new, and Congress has sometimes reached partial solutions in the past. But today's budgeting process makes deficit control harder.

Congress created the modern budget process in 1974 after President Richard Nixon attempted to withhold money Congress had appropriated by passing the Congressional Budget and Impoundment Control Act of 1974. The Act created the House and Senate Budget Committees, the Congressional Budget Office, annual budget resolutions, and the reconciliation process.

A budget resolution is a congressional blueprint for spending. Its limits are enforced through congressional rules that can be waived, and Congress does not always adopt a resolution. From 2006 to 2025, it did so only nine times. Reconciliation has become a major route for passing tax and spending legislation with a simple Senate majority. This can reduce or increase deficits; the CBO estimated the 2025 reconciliation law, sometimes called the One Big Beautiful Bill, increased deficits by about $3.4 trillion over 10 years relative to its January 2025 baseline. There is no requirement to balance the budget, and whichever party controls Congress has incentives to get what it wants done, knowing that if it is out of power in the future, the problem becomes the other party's. If they are in power in the future, they often rationalize spending today by arguing that either general prosperity or future policy choices will address any potential negative consequences of adding to the debt.

What policies might the 120th Congress try to pass?

Each year there are some legislators focused on deficit reduction, and some introduced bills in the 119th Congress that may be revisited once the new Congress is sworn in. Many of these bills have been sponsored by both Democrats and Republicans.

The bipartisan Budgeting for a Better America Act is one potential option. It would move Congress to a two-year budget framework, create an 18-member bipartisan fiscal commission, require more long-range fiscal information, and ask the commission to develop a plan that brings the deficit to 3% of GDP within 10 years.

Other proposals like the bipartisan Senate Fiscal Commission Act would establish a commission on fiscal responsibility. The bipartisan PROMISE Act would start a process requiring Congress to consider a proposal designed to keep the Social Security trust funds solvent for at least 50 years. The Dollar-for-Dollar Deficit Reduction Act would require a debt-limit increase or suspension to be matched by spending reductions over the following decade. The debt ceiling, the amount of debt U.S. legislators have approved for the U.S. to take on, is currently $41.1 trillion, and the Bipartisan Policy Center estimates it could be reached again between late winter and mid-summer 2027.

Would these plans actually reduce the deficit?

Though each of these bills is targeted at deficit reduction, a target, commission, or new budget calendar only matters if Congress ultimately changes spending or taxes. CBO’s deficit-reduction options show that large savings are only available through significant changes to Medicare, Medicaid, Social Security, defense, other discretionary programs, and the tax code. Every option imposes costs on someone, which means agreement will be more difficult about what programs to cut or change to save costs.

The Takeaway

The 120th Congress is likely to face deficit reduction because debt, interest costs, a potential new debt-limit deadline, and trust-fund deadlines are converging.

Budget-process reform currently has clearer bipartisan support than any specific package of tax increases or benefit cuts.

The hardest question is not whether deficits should fall, but which taxes, benefits, or federal services lawmakers will change, and that will depend on who is elected to Congress and what compromises legislators are willing to make.