A report from the Congressional Budget Office (CBO) anticipates that the federal deficit will skyrocket to $2.6 trillion by 2034, while public debt will reach over the next decade 116% of the Gross Domestic Product (GDP), the highest level ever recorded.
LIVE: CBO Director holds a press briefing on the 10-year Budget & Economic Outlook. https://t.co/qbuCcBIwZo
— U.S. CBO (@USCBO) February 7, 2024
The deficit will reach $2.6 trillion in 2034
According to the report, the deficit will rise to $1.6 trillion in fiscal year 2024, and will increase to $200 billion in 2025. The CBO indicates that it will be reduced again to $1.6 trillion in 2027, at which point the deficit will grow consecutively until adding $1 trillion more in 2034 to reach $2.6 trillion. In relation to annual GDP, the deficit will close 2024 at 5.6%, but will shoot up to 6.1% next year. After a drop to 5.2% in 2027 and 2028, the deficit will rise again to 6.1% within a decade. The CBO notes that "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."
Within 10 years, debt will reach 116% of GDP
The rise in public debt over the next 10 years does not bring better news. According to CBO forecasts, public debt will increase 17 points during this period, going from 99% of GDP at the end of 2024 to 116% of GDP. It is, according to the CBO, the "highest level ever recorded- by the end of 2034." Starting this year, "the debt would continue to grow if current laws were left broadly unchanged."
Aging will increase public spending starting in 2028
The study also projects that public spending will increase considerably starting in 2028 as a consequence of the aging population and the increase in net interest costs. Thus, disbursements in 2024 will amount to 23.1%. Starting in 2028, they will increase to reach 24.1% of GDP in 2034.
Slight fluctuations in tax revenue
The government’s revenue forecast will suffer slight fluctuations over the next few years, although it will remain from 17-18%. According to the CBO, the administration will collect the equivalent of 17.5% of GDP in 2024. In 2025, revenue will fall to 17.1% and reach 17.9% in 2027 "after certain provisions of the 2017 tax law expire." Tax collection will stabilize around that level until 2034.
