CBO Revises 2024 Budget Deficit Forecast to $1.9 Trillion

The National Debt Clock in Atlanta, Ga., on May 20, 2024. (Madalina Vasiliu/The Epoch Times)

The U.S. budget deficit is expected to be $1.9 trillion for fiscal year 2024, higher than the $1.5 trillion forecast in February, according to the updated outlook of the Congressional Budget Office (CBO).

The CBO’s latest projections, released on June 18, account for recently enacted legislation. They include a $145 billion increase for student loan-forgiveness schemes, a $50 billion boost for Medicaid, and $95 billion in emergency supplemental appropriations for aid to Ukraine, Israel, and Indo-Pacific countries.

The revised outlook also includes $70 billion for deposit insurance “because the Federal Deposit Insurance Corporation is not recovering payments it made when resolving bank failures in 2023 and 2024 as quickly as CBO previously anticipated.”

Federal outlays are projected to be $6.8 trillion in the current fiscal year, and revenues are forecast to be $4.9 trillion.

In total, debt held by the public will represent 99 percent of the gross domestic product (GDP), the nonpartisan budget watchdog said in its updated 2024–2034 budget and economic outlook.

For the broader U.S. economy, CBO researchers anticipated that real GDP will be 2 percent in 2024 and 2025 and slow to 1.9 percent in 2026.

Inflation is expected to moderate, with the Consumer Price Index slowing to 3 percent in 2024, 2.3 percent in 2025, and 2.2 percent in 2026.

The labor market is predicted to cool in the coming years as monthly payroll employment creation slows and the unemployment rate ticks higher.

Interest rates will gradually fall over the next few years, the CBO says. The Federal Reserve’s benchmark federal funds rate will drop to 4.8 percent next year and then to 3.8 percent by 2026.

Dollars and Cents Over the Next Decade

The federal government won’t post a budget deficit below $1 trillion over the next decade, according to the CBO’s newest report.

By 2034, Washington will be facing a $2.8 trillion shortfall, accounting for nearly 7 percent of GDP, the CBP estimates.

Cumulatively, Washington is expected to register $22 trillion in deficits from 2024 to 2034.

Deficits would be higher over the 10-year period if not for immigration, says Phillip Swagel, the CBO director.

“In our baseline budget projections, which account for the immigrants in the surge and their children, the increase in immigration lowers deficits by a net total of $0.9 trillion over the 2024–2034 period,” Mr. Swagel said in a statement accompanying the outlook. “Specifically, revenues will be higher by $1.2 trillion over that period, in our estimation, and spending for mandatory programs and net outlays for interest on the federal debt will be higher by a total of $0.3 trillion as a result of the immigration surge.”

Meanwhile, the national debt will exceed $50 trillion in the next 10 years and represent more than 122 percent of the GDP.

While revenues will top $5 trillion next year and firm above $7.4 trillion by 2034, outlays will climb even higher. Federal spending will reach $7 trillion in 2025 and surpass $10.3 trillion in the next decade (25 percent of GDP).

Net interest payments are projected to be $1 trillion a year, hitting $1.7 trillion by 2034, and account for one-sixth of all federal spending. They will represent more than 4 percent of the GDP, double the 1974–2023 average.

“Beginning in 2025, interest costs are greater in relation to GDP than at any point since at least 1940 (the first year for which the Office of Management and Budget reports such data) and exceed outlays for defense and outlays for nondefense programs and activities,” the CBO stated.

Cumulatively, interest charges will be about $13 trillion over this span.

Tax Cuts Expiration

Despite the CBO assuming that former President Donald Trump’s tax cuts will expire at the end of next year, officials forecast that revenue growth as a percentage of GDP will flatline.

“After 2027, revenues change little as a percentage of GDP,” the report noted.

However, the White House claims that the CBO update proves the Tax Cuts and Jobs Act will fuel the ballooning national debt and budget deficits in the coming years.

“After the prior administration added $8 trillion to the debt, new CBO numbers show that the Trump tax windfalls for billionaires and corporations continue to come at the expense of the American people by driving up deficits,” said senior deputy press secretary Andrew Bates in a memo released following the adjusted CBO numbers.

President Joe Biden, administration officials, and scores of Democratic lawmakers have continually blamed the Trump-era tax cuts for the sea of red ink flooding the nation’s capital.

National economic adviser Lael Brainard argued that extending the Trump tax cuts would benefit the wealthy at the expense of low- and middle-income households.

“Congressional Republicans should be transparent about how they want working families to pick up the $5 trillion tab for their tax cuts skewed to the ultra-wealthy and their additional corporate tax cuts,” Ms. Brainard said in a June 13 memo.

The CBO has previously noted that extending these tax cuts would add a net $3.3 trillion to federal deficits over the next 10 years.

At the same time, the CBO recently adjusted its revenue forecasts. When the Tax Cuts and Jobs Act was enacted, the CBO projected tax receipts would drop by $1.1 trillion between 2018 and 2027. The updated estimates suggest revenues will be roughly $600 billion higher for the same nine-year period after adjusting for inflation.

Following the CBO revisions, the Committee for a Responsible Federal Budget urged the presumptive 2024 presidential candidates to present plans to fix the national debt.

“Today’s projections show a shocking new record: interest payments on the national debt will soon be higher as a share of the economy than they have ever been in the history of the country,” said Maya MacGuineas, the organization’s president, in a statement. “This is a surefire path to a weakened nation, and we must change course.”

The national debt presently stands at nearly $34.7 trillion.