US Congressional Budget Office's 10-year projections for US defence spending, interest payments, and total deficit. (Congressional Budget Office/Janes)
The Congressional Budget Office (CBO) released its regular 10-year budget and economic report on 7 February, projecting growing deficits, public debt, and costs attributable to an ageing population while revenue remains largely the same by 2034.
The CBO emphasised that its forecasts, based on legislation enacted through 3 January 2024 and economic data as of 5 December 2023, assume current laws on taxes and spending remain generally unchanged.
This budget deficit is anticipated to increase from USD1.6 trillion in fiscal year (FY) 2024 to USD2.6 trillion in FY 2034, or from 5.6% of GDP in FY 2024 to 6.1% of GDP in FY 2034, significantly larger than the 3.7% average over the past 50 years, the CBO said.
The deficit projections are smaller than in the CBO's May 2023 report due to a USD2.3 trillion reduction in discretionary spending over the 10-year period from the combination of the Fiscal Responsibility Act (FRA), which was signed into law on 3 June 2023, and the Further Continuing Appropriations and Other Extensions Act of 2024.
This primary deficit, which excludes interest payments, is expected to decline significantly from USD1 trillion in FY 2023 to USD712 billion in FY 2024, increase to USD821 billion in FY 2025, and then decline for two years before rising to USD929 billion in FY 2034.
The CBO figures project increasing interest payments on the deficit. These totalled USD659 billion in FY 2023 and are expected to increase to USD850 billion in FY 2024. These estimates continue to rise through FY 2034, when they would reach USD1.63 trillion, or 3.9% of GDP.
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