The Congressional Budget Office (CBO) said Tuesday that it projects the federal budget deficit to reach $1.9 trillion this fiscal year as government spending continues to rise.
The estimated gap between annual revenues and spending is about $400 billion higher than the Treasury Department’s February projection, contained in the nonpartisan budget management agency’s latest budget and economic outlook report for fiscal years 2024-2034.
The bureau attributed the 27 percent increase to several key factors, including foreign military aid, the Biden administration’s student loan measures, slower-than-expected collection of payments made by the Federal Deposit Insurance Corp. in response to bank failures over the past two years, higher Medicaid spending and higher discretionary spending.
The cumulative deficit from 2025 to 2034 is projected to reach $22.1 trillion, 10 percent higher than what the Treasury Department projected in February and an increase of $2.1 trillion.
“The largest factor in the cumulative increase was the incorporation of recently enacted legislation into CBO’s base, which increased the projected deficit by $1.6 trillion,” CBO said Monday. “The legislation included emergency supplemental appropriations that provided $95 billion in assistance to Ukraine, Israel, and countries in the Indo-Pacific region.”
“By law, CBO projects that this funding will continue into the future (adjusted for inflation) and result in an increase in discretionary spending of $0.9 trillion through 2034.”
Compared to the past 50 years, budget analysts said deficits over the next decade “will be about 70 percent larger than the historical average when measured relative to economic output.”
As interest costs and spending on programs such as Medicare and Social Security continue to rise, CBO projects federal spending to reach 24.2 percent of GDP in 2024 and 24.9 percent of GDP in 2034.
CBO projected revenues would reach 17.2% of GDP in 2024, then grow by 0.8% through 2027 as parts of former President Trump’s signature 2017 tax plan expire.
National debt is also expected to rise from 99% of GDP in 2024 to 122% in 2034, something the Treasury Department says will be “higher than at any point in history”.
This latest update has already sparked a series of reactions from lawmakers and budget hawks, with Republicans and Democrats in particular already trading blame over the nation’s more than $34 trillion debt.
“The projected $400 billion deficit increase over the last four months represents the third-highest annual deficit increase in U.S. history and is equivalent to 6.7% of GDP,” House Budget Committee Chairman Jody Arrington (R-Texas) said in a statement on Tuesday, also criticizing “the Biden Administration’s use of executive action.”
White House press secretary Karine Jean-Pierre called the report “further evidence that Congress needs to pass President Biden’s budget proposal,” which she said includes proposals aimed at raising taxes on the wealthy rather than “inflating the debt with another $5 trillion in Trump tax cuts.”
Updated 5:29 p.m.
