Treasury Secretary Scott Bessent has made a simple promise with complicated arithmetic.

Appearing before both the Senate Finance Committee and the House Ways and Means Committee, Bessent endorsed a bipartisan effort to reduce the federal deficit to 3% of gross domestic product (GDP) by the end of President Donald Trump's term.

According to The Center Square, Bessent told lawmakers the administration could achieve “something with a three in front of it,” framing deficit reduction as one reason he left a lucrative finance career to enter public service.

The problem is that Washington’s own numbers don’t support the pledge. The administration’s fiscal 2027 budget projects that deficits will remain above 5% of GDP through 2029.

Meanwhile, the Congressional Budget Office’s February outlook projects deficits will never fall below 5.6% of GDP over the next decade. Debt held by the public has already climbed to 101% of GDP, its highest level since World War II.

Surface-Depth Improvements

That disconnect moved from theoretical to immediate on June 8, when the CBO released its Monthly Budget Review for May.

At first glance, the fiscal picture appeared to improve. The deficit through the first eight months of fiscal year 2026 totaled $1.248 trillion, $116 billion lower than the same period a year earlier.

But timing matters.

Because June 1, 2025, fell on a weekend, certain payments were shifted into May 2025. Adjusting for that timing effect, the apparent improvement evaporates, and the deficit actually exceeds last year’s level by $19 billion.

Meanwhile, May itself produced a $294 billion deficit, showing how persistent spending pressures and rising financing costs continue to complicate Washington’s deficit-reduction ambitions.

Three Points of Pressure

The first obstacle is interest expense.

Net interest costs rose by $68 billion, or 10%, during the first eight months of the fiscal year, reaching $742 billion. In May alone, interest payments jumped by $28 billion, a 32% increase from the previous year, largely due to higher long-term rates.

Based on the CBO’s February projections, the United States is on track to exceed $1 trillion annually in interest payments—more than discretionary defense spending. 

The second problem is revenue.

Although combined individual income and payroll taxes increased by $148 billion (due to continued wage growth), corporate tax receipts fell by $88 billion – a 30% decline.

The CBO attributes the drop to provisions in the 2025 reconciliation act that allow larger deductions for certain investments. Put plainly – legislative choices are actively weakening the revenue base that policymakers say they want to strengthen.

The third pressure point is tariffs.

Customs duties surged by $107 billion year-to-date, rising 132% because of executive actions. But the apparent windfall is proving temporary.

The CBO noted that net tariff collections “declined sharply” in May as Treasury began issuing refunds tied to the Supreme Court’s February ruling.

The Clock Keeps Ticking

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, warned last month that “$2 trillion deficits used to be unheard of.”

“It’s beyond scary that $2 trillion deficits are now the norm,” she said.

At roughly 6% of GDP, today’s deficits are already double the level Bessent says he hopes to achieve.

Finally, academia also struggles to find an optimistic angle. According to researchers from Penn Wharton Budget Model, the U.S. has roughly two decades before national debt starts colliding with market limits.

"As soon as capital markets start believing that Congress will never get its act together, things unravel immediately," said faculty director Kent Smetters.

Such projections make the divergence between aspiration and arithmetic so consequential.

Bessent’s 3% target may be politically attractive, but the CBO report demonstrates that without major policy changes, the federal government is moving in the opposite direction.

Investors can debate whether Washington has a plan. The numbers increasingly suggest it does not.

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