# U.S. federal deficit-to-GDP below 5% for FY2026? FY2026 Updated: April 29, 2026 Category: Economics Tags: GDP HTML: /markets/economics/gdp/u-s-federal-deficit-to-gdp-below-5-for-fy2026/ ## Short Answer **Both the model and the market expect the U.S.** federal deficit-to-GDP to be below **5%** for FY2026, with no compelling evidence of mispricing. ## Key Claims (January 2026) **- - CBO revenue estimates for FY2026 account for expiring tax provisions.** - CBO projects lower nominal GDP growth for FY2026 compared to SPF. - Higher interest rates significantly impact CBO's federal deficit projections. - White House proposes **$807** billion for FY2026 non-defense discretionary outlays. ### Why This Matters (GEO) - AI agents extract claims, not arguments. - Improves citation probability in summaries and answer cards. - Enables fact stitching across multiple sources. ## Executive Verdict **Key takeaway.** **Model**'s **2.7%** **probability** is below the 6c **market** (16.7x payout context), partly due to projected lower nominal GDP growth. ### Who Wins and Why | Outcome | Market | Model | Why | | --- | --- | --- | --- | | Below 5% | 6.0% | 2.7% | Sustained economic growth could boost tax revenues and expand GDP, reducing the deficit-to-GDP ratio. | ## Model vs Market - Model Probability: 2.7% (Yes) - Market Probability: 6.0% (Yes) - Yes refers to: Below 5% - Edge: -3.3pp - Expected Return: -55.3% - R-Score: -0.33 - Total Volume: $52,291.88 - 24h Volume: $113.41 - Open Interest: $13,447.59 - Expiration: October 20, 2026 ## Market Behavior & Price Dynamics This market exhibits a stable, sideways trading pattern, consistently pricing the probability of the U.S. federal deficit-to-GDP ratio falling below 5% for FY2026 at very low levels. The price has remained within a tight range of 5.0% to 8.0% throughout its history. This narrow consolidation suggests a strong consensus among market participants. Key levels have been established with apparent resistance at the 8.0% mark and support near the 5.0% level. The current price of 6.0% sits near the lower end of this range, indicating sustained pessimism. Given the lack of specific news or economic data provided, the minor fluctuations within this range cannot be attributed to any particular external events. The total trading volume of 1,470 contracts is modest, but the patterns are informative. Early price points showed zero volume, suggesting they were initial offers rather than active trades. A notable volume spike of 50 contracts occurred on April 29th, coinciding with a price drop to 6.0%, which could indicate a period of increased conviction or price discovery. Overall, the combination of a low, stable price and modest volume suggests a confident and unwavering market sentiment. The market consensus is that there is a very low probability, consistently less than 10%, of the federal deficit-to-GDP ratio meeting the sub-5% threshold in fiscal year 2026. ## Contract Snapshot The market resolves to YES if the U.S. federal budget deficit as a percentage of GDP for fiscal year 2026 is below 5%, as reported in the U.S. Treasury / Office of Management and Budget Joint Statement on Budget Results; otherwise, it resolves to NO. The market opened on March 11, 2026, and will close and expire early upon the release of this economic data, or by October 20, 2026, at 8:29 am EDT at the latest, with projected payouts 30 minutes after closing. ## Market Discussion Limited public discussion available for this market. ## Market Data | Contract | Yes Bid | Yes Ask | Last Price | Volume | Open Interest | | --- | --- | --- | --- | --- | --- | | Below 5% | 6% | 7% | 6% | $52,291.88 | $13,447.59 | ## How Would TCJA Extension Affect FY2026 Federal Revenues? Baseline FY2026 Federal Revenues | $5,246 billion (assuming TCJA expiration) [[^]](https://www.cbo.gov/system/files/2024-05/60114-Budgetary-Outcomes.pdf) | Projected FY2026 Federal Revenues | $4,988 billion (with full TCJA extension) [[^]](https://www.cbo.gov/system/files/2024-05/60114-Budgetary-Outcomes.pdf) | Revenue Reduction for FY2026 | $258 billion (compared to baseline with full TCJA extension) [[^]](https://www.cbo.gov/system/files/2024-05/60114-Budgetary-Outcomes.pdf) | **The Congressional Budget Office (CBO) estimates federal revenues for fiscal year 2026, considering the expiration of certain tax provisions [[^]](https://www.cbo.gov/system/files/2024-05/60114-Budgetary-Outcomes.pdf)** The Congressional Budget Office (CBO) estimates federal revenues for fiscal year 2026, considering the expiration of certain tax provisions [[^]](https://www.cbo.gov/system/files/2024-05/60114-Budgetary-Outcomes.pdf). Specifically, the individual income tax provisions and changes to the estate and gift tax provisions of the 2017 Tax Cuts and Jobs Act (TCJA) are set to expire at the end of calendar year 2025. Under the CBO's baseline projections, which assume these provisions expire as scheduled, federal revenues are projected to reach **$5,246** billion in FY2026 [[^]](https://www.cbo.gov/system/files/2024-05/60114-Budgetary-Outcomes.pdf). Extending TCJA provisions would significantly reduce FY2026 federal revenues. If lawmakers were to fully extend these specific TCJA provisions, the CBO's "Alternative Fiscal Scenario" projects that federal revenues in FY2026 would instead be **$4,988** billion [[^]](https://www.cbo.gov/system/files/2024-05/60114-Budgetary-Outcomes.pdf). This projection, detailed in the CBO's May 2024 report, "Budgetary Outcomes Under Alternative Assumptions About Spending and Revenues," represents a **$258** billion decrease in federal revenues for FY2026 compared to the CBO's baseline assumption of expiration [[^]](https://www.cbo.gov/system/files/2024-05/60114-Budgetary-Outcomes.pdf). ## How Do Higher Interest Rates Impact Federal Deficit Projections? Interest Rate Increase Scenario | 1 percentage point higher than baseline (2025-2034) [[^]](https://www.cbo.gov/publication/61429) | FY2026 Deficit-to-GDP Increase | 0.7 percentage points larger than baseline [[^]](https://www.cbo.gov/publication/61429) | FY2026 Deficit-to-GDP Increase (Basis Points) | 70 basis points [[^]](https://www.cbo.gov/publication/61429) | **The Congressional Budget Office (CBO) explored the budgetary implications of higher interest rates** The Congressional Budget Office (CBO) explored the budgetary implications of higher interest rates. In its report, "The Long-Term Budget Outlook Under Alternative Scenarios for the Economy and the Budget," the CBO conducted a sensitivity analysis. This analysis examined a specific scenario where interest rates on federal debt consistently remained 1 percentage point higher than the CBO’s baseline projections for all years from 2025 through 2034 [[^]](https://www.cbo.gov/publication/61429). Higher interest rates significantly increase the 2026 deficit-to-GDP ratio. Under this alternative scenario, the CBO projected a notable impact on the federal deficit for fiscal year 2026. The deficit-to-GDP ratio for that year is anticipated to be 0.7 percentage points larger than the baseline projection [[^]](https://www.cbo.gov/publication/61429). This increase is equivalent to 70 basis points, highlighting the considerable effect elevated interest rates could have on the federal deficit [[^]](https://www.cbo.gov/publication/61429). ## How Do CBO and SPF Nominal GDP Forecasts Compare for FY2026? CBO FY2026 Nominal GDP Growth | 4.4% [[^]](https://ideas.repec.org/p/cbo/report/61882.html) | Philadelphia Fed SPF FY2026 Nominal GDP Growth | 4.8% [[^]](https://www.philadelphiafed.org/-/media/FRBP/Assets/Surveys-And-Data/survey-of-professional-forecasters/2026/spfQ126.pdf) | Difference (CBO vs. SPF) | 0.4 percentage points lower [[^]](https://ideas.repec.org/p/cbo/report/61882.html) | **The CBO projects lower nominal GDP growth for FY2026** The CBO projects lower nominal GDP growth for FY2026. The Congressional Budget Office (CBO), in its February 2026 Budget and Economic Outlook, forecasts nominal Gross Domestic Product (GDP) to grow by **4.4%** in fiscal year 2026 [[^]](https://ideas.repec.org/p/cbo/report/61882.html). This projection is an important factor for calculating economic ratios, such as the federal deficit-to-GDP. The SPF consensus indicates higher FY2026 nominal GDP growth. In contrast, the Philadelphia Fed's First Quarter 2026 Survey of Professional Forecasters (SPF) shows a median consensus forecast of **4.8%** for nominal GDP growth in fiscal year 2026 [[^]](https://www.philadelphiafed.org/-/media/FRBP/Assets/Surveys-And-Data/survey-of-professional-forecasters/2026/spfQ126.pdf). This survey compiles predictions from a panel of professional economists, providing a widely recognized consensus view on future economic indicators [[^]](https://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/). CBO's FY2026 nominal GDP projection is 0.4 percentage points lower. The CBO's current projection of **4.4%** for nominal GDP growth in FY2026 is 0.4 percentage points below the **4.8%** consensus forecast provided by the Philadelphia Fed's Survey of Professional Forecasters [[^]](https://ideas.repec.org/p/cbo/report/61882.html). ## What is the Non-Defense Discretionary Budget Difference for FY2026? White House FY2026 Non-Defense Discretionary Outlays | $807 billion [[^]](https://www.whitehouse.gov/wp-content/uploads/2025/05/Fiscal-Year-2026-Discretionary-Budget-Request.pdf), [[^]](https://www.cbpp.org/research/federal-budget/tight-2026-non-defense-funding-rejects-trumps-proposed-deep-cuts-but) | Republican Study Committee FY2026 Non-Defense Discretionary Outlays | $590 billion [[^]](https://rsc-pfluger.house.gov/sites/evo-subsites/republicanstudycommittee.house.gov/files/evo-media-document/final_rsc_budget.pdf) | Dollar-Value Difference | $217 billion [[^]](https://www.whitehouse.gov/wp-content/uploads/2025/05/President-Trumps-Fiscal-Year-2026-Discretionary-Funding-Request-Overview.pdf) | **The White House proposes $807 billion for non-defense discretionary outlays in FY2026** The White House proposes **$807** billion for non-defense discretionary outlays in FY2026. The most recent White House budget proposal designates **$807** billion for non-defense discretionary spending for Fiscal Year 2026 [[^]](https://www.whitehouse.gov/wp-content/uploads/2025/05/Fiscal-Year-2026-Discretionary-Budget-Request.pdf), [[^]](https://www.cbpp.org/research/federal-budget/tight-2026-non-defense-funding-rejects-trumps-proposed-deep-cuts-but). This amount is part of an overall **$1,702** billion discretionary budget request, which also includes **$895** billion for defense discretionary spending [[^]](https://www.whitehouse.gov/wp-content/uploads/2025/05/Fiscal-Year-2026-Discretionary-Budget-Request.pdf). This proposed level for non-defense discretionary funding aligns with the President's previous proposals for FY2025 [[^]](https://www.cbpp.org/research/federal-budget/tight-2026-non-defense-funding-rejects-trumps-proposed-deep-cuts-but). The RSC's FY2026 budget proposes **$590** billion for non-defense discretionary outlays. In contrast, the official budget proposal from the Republican Study Committee (RSC) projects non-defense discretionary outlays to be **$590** billion for Fiscal Year 2026 [[^]](https://rsc-pfluger.house.gov/sites/evo-subsites/republicanstudycommittee.house.gov/files/evo-media-document/final_rsc_budget.pdf). The RSC's total discretionary spending proposal for FY2026 amounts to **$1,500** billion, with **$910** billion designated for defense discretionary spending [[^]](https://rsc-pfluger.house.gov/sites/evo-subsites/republicanstudycommittee.house.gov/files/evo-media-document/final_rsc_budget.pdf). A **$217** billion difference exists in non-defense discretionary outlays for FY2026. This disparity represents the dollar-value difference in planned non-defense discretionary outlays for Fiscal Year 2026 between the White House budget proposal and the Republican Study Committee's budget proposal. ## When is the CBO's 2026 Budget and Economic Outlook Release Date? Report Title | Budget and Economic Outlook [[^]](https://www.crfb.org/papers/cbos-february-2026-budget-and-economic-outlook) | Release Date and Time | Wednesday, February 11, 2026, at 12:00 PM [[^]](https://www.crfb.org/papers/cbos-february-2026-budget-and-economic-outlook) | Key Content | Initial FY2026 federal deficit projections [[^]](https://www.crfb.org/papers/cbos-february-2026-budget-and-economic-outlook) | **The Congressional Budget Office will release its initial 2026 Budget and Economic Outlook** The Congressional Budget Office will release its initial 2026 Budget and Economic Outlook. This highly anticipated report is scheduled for Wednesday, February 11, 2026, at 12:00 PM [[^]](https://www.crfb.org/papers/cbos-february-2026-budget-and-economic-outlook). It is considered a primary **market**-moving catalyst due to its comprehensive nature and its inclusion of crucial near-final projections for the Fiscal Year 2026 federal deficit [[^]](https://www.crfb.org/papers/cbos-february-2026-budget-and-economic-outlook). These projections are key for prediction markets concerning the U.S. federal deficit-to-GDP ratio for FY2026 [[^]](https://www.crfb.org/papers/cbos-february-2026-budget-and-economic-outlook). Multiple organizations have confirmed the CBO report's release date. The February 11, 2026, release date for the CBO's outlook has been referenced and confirmed by reputable organizations, including the Committee for a Responsible Federal Budget (CRFB) and the American Action Forum [[^]](https://www.crfb.org/papers/cbos-february-2026-budget-and-economic-outlook). Following this foundational report, additional analyses are expected, such as a chartbook on the February 2026 CBO Baseline, which will offer further insights into the projections provided on this date [[^]](https://www.crfb.org/papers/chartbook-february-2026-cbo-baseline-what-it-says-and-what-it-means). ## What Could Change the Odds **Key takeaway.** Catalyst analysis unavailable. ## Key Dates & Catalysts - **Expiration:** January 18, 2027 - **Closes:** October 20, 2026 ## Decision-Flipping Events - Catalyst analysis unavailable. ## Related Research Reports - [China overtakes USA’s economy by 2030?](/markets/economics/growth/china-overtakes-usa-s-economy-by-2030/) - [Costco raises hot dog combo price?](/markets/economics/inflation/costco-raises-hot-dog-combo-price/) - [Next Fed rate hike?](/markets/economics/fed/next-fed-rate-hike/) - [US gas prices on Apr 29, 2026](/markets/economics/oil-and-energy/us-gas-prices-on-apr-29-2026/) ## Historical Resolutions No historical resolution data available for this series. ## Disclaimer This content is for informational and educational purposes only and does not constitute financial, investment, legal, or trading advice. Prediction markets involve risk of loss. Past performance does not guarantee future results. We are not affiliated with Kalshi or any prediction market platform. Market data may be delayed or incomplete. ### Data Sources & Model Transparency **Data Sources:** Octagon Deep Research aggregates information from multiple sources including news, filings, and market data. **Freshness:** Analysis is generated periodically and may not reflect the latest developments. Verify critical information from primary sources.