The Congressional Budget Office said Tuesday that it projects a federal budget deficit increase of $400 billion or 27% this year, from the last budget outlook released in February. The major drivers of the change are higher costs from the supplemental spending package signed in April that provides military aid to Ukraine and Israel; higher than estimated costs of reducing student loan borrower balances; increased Medicaid spending; and higher spending on FDIC insurance after the agency has not yet recovered payments it made after the banking crises of 2023 and 2024.
Quick Read
Congressional Budget Office Projects a $400 Billion Increase in This Year’s Federal Deficit
- Deficit Increase: The Congressional Budget Office (CBO) projects a 27% increase in the federal budget deficit, amounting to $400 billion more than previous estimates.
- Primary Drivers: Key factors include higher costs from military aid to Ukraine and Israel, student loan forgiveness, increased Medicaid spending, and unresolved FDIC insurance payments from recent banking crises.
- Debt Projection: Publicly held debt is expected to rise from 99% of GDP at the end of 2024 to 122% of GDP by 2034, the highest level ever recorded, with a continued upward trend.
- Long-term Concerns: Lawmakers face challenges with servicing the debt, an aging population increasing Social Security and Medicare costs, and rising healthcare expenses.
- Impact on Biden’s Claims: The report challenges President Biden’s assertions of deficit reduction, as borrowing is projected to increase this year.
- White House Response: Spokeswoman Karine Jean-Pierre emphasized Biden’s commitment to deficit reduction, contrasting it with former President Trump’s record.
- Trump’s Fiscal Policies: Trump, running for president in 2024, plans further tax cuts, despite previous legislation under his administration contributing to an estimated $8.4 trillion increase in the national debt over 10 years.
- Expert Commentary: Michael A. Peterson, CEO of the Peter G. Peterson Foundation, warns of the unsustainable nature of higher interest rates on a growing debt load, calling for urgent fiscal reforms.
- Upcoming Fiscal Challenges: Newly elected leaders will face critical fiscal decisions next year, including the reinstatement of the debt limit, expiration of the 2017 tax cuts, and key healthcare and spending policies.
The Associated Press has the story:
Congressional Budget Office projects a $400B increase in this year’s federal deficit
Newslooks- WASHINGTON (AP) —
The Congressional Budget Office said Tuesday that it projects a federal budget deficit increase of $400 billion or 27% this year, from the last budget outlook released in February.
The major drivers of the change are higher costs from the supplemental spending package signed in April that provides military aid to Ukraine and Israel; higher than estimated costs of reducing student loan borrower balances; increased Medicaid spending; and higher spending on FDIC insurance after the agency has not yet recovered payments it made after the banking crises of 2023 and 2024.
The report also projects that the nation’s publicly held debt is set to increase from 99% of gross domestic product at the end of 2024 to 122% of GDP — the highest level ever recorded — by the end of 2034. “Then it continues to rise,” the report states.
Deficits are a problem for lawmakers in the years to come because of the burden of servicing the total debt load, an aging population that pushes up the total cost of Social Security and Medicare and rising health care expenses.
The report cuts into President Joe Biden’s claim that he has lowered deficits, as borrowing increased in 2023 and is slated to climb again this year.
The White House budget proposal released in March claims to reduce the deficit by roughly $3 trillion over the next 10 years and would raise tax revenues by a total of $4.9 trillion in the same period.
White House spokeswoman Karine Jean-Pierre, said after the report’s release that “the president is going to work to do everything he can when it comes to lowering the deficit,” adding that former president Trump “didn’t sign a single law to reduce the deficit.”
Former President Donald Trump, as a candidate for president in 2024, recently told a group of CEOs that he would further cut the corporate tax rate he lowered while in office, among other things. The Committee for a Responsible Federal budget estimates that the 10-year cost of the legislation and executive actions President Trump signed into law was about $8.4 trillion, with interest.
Michael A. Peterson, CEO of the Peter G. Peterson Foundation, said the CBO projections show that the outlook for America’s critical national debt challenge is worsening.
“The harmful effects of higher interest rates fueling higher interest costs on a huge existing debt load are continuing, and leading to additional borrowing. It’s the definition of unsustainable,” Peterson said.
“The leaders we elect this fall will face a series of highly consequential fiscal deadlines next year, including the reinstatement of the debt limit, the expiration of the 2017 tax cuts and key decisions on healthcare subsidies, discretionary spending caps and more.”
