The former acting chair of the White House Council of Economic Advisers discusses the Biden administration’s handling of the economy on ‘The Bottom Line.’
The nonpartisan Congressional Budget Office (CBO) on Wednesday released a report projecting that federal budget deficits will skyrocket to well over $2 trillion per year in the next decade.
The baseline in the CBO’s annual budget and economic outlook covers the 2024 to 2034 period and projects that the budget deficit will rise from about $1.6 trillion in 2024 to $2.6 trillion in 2034, with deficits topping $2 trillion each year after 2031.
As a percentage of gross domestic product (GDP) — or the size of the U.S. economy — the deficit rises from 5.6% of GDP in 2024 to 6.1% of GDP in 2034. That comes after the percentage briefly dips in the late 2020s due to the projected expiration of tax provisions from the 2017 Trump tax cuts resulting in increased tax revenue for the government.
“After 2028, deficits climb as a percentage of GDP, returning to 6.1 percent in 2034. Since the Great Depression, deficits have exceeded that level only during and shortly after World War II, the 2007-2009 financial crisis, and the coronavirus pandemic,” the CBO wrote in the report.
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The Congressional Budget Office projects the federal budget deficit to rise to more than $2 trillion per year in the next decade. (iStock / iStock)
In a statement attached to the report, CBO Director Phillip Swagel noted the deficit rising from $1.6 trillion in 2024 to $2.6 trillion in 2034 and wrote, “Measured in relation to economic output, deficits during that period are about 50 percent larger than their historical average over the past 50 years.”
He added that net interest costs — which are incurred through servicing the more than $34 trillion national debt — are “a major contributor to the deficit, and their growth is equal to about three-quarters of the increase in the deficit from 2024 to 2034.”
“Initially, net interest costs are similar to the amounts of discretionary spending both for defense and for nondefense activities,” Swagel added. “By the end of the period, they are roughly one and a half times larger than each, at $1.6 trillion.”
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The federal budget deficit is set to grow substantially over the next decade despite Congress passing the bipartisan Fiscal Responsibility Act last year. (Julia Nikhinson / Bloomberg / File / Getty Images)
Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, called for Congress to take meaningful steps to control the deficit and put the national debt on a more fiscally sustainable trajectory.
“Policymakers need to take this somber moment to reflect on the grave situation we face and commit themselves to do better,” MacGuineas said in a statement in response to the CBO’s report. “Last year’s Fiscal Responsibility Act was a good start, but there is so much more to be done.”
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“We can start by actually passing a budget and by establishing a bipartisan fiscal commission to tackle some of these issues. We need a real plan to put the national debt on a downward sustainable path before it’s too late,” MacGuineas added.
