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Bidenomics: the deficit soars by $400 billion compared to what was expected in February

The Congressional Budget Office warns that measures are needed to prevent the numbers from worsening over the next decade and points out that economic growth is slowing.

Un empleado examina una hoja de billetes de 5 dólares al salir de la máquina de impresión en la Oficina de Grabado e Impresión del Tesoro de EE.UU. en Washington.

(Eva HAMBACH/AFP)

Published by
Israel Duro

Money is pouring out of Biden, and he is putting the future - and the present - of the American economy at risk. The Congressional Budget Office (CBO) warned in a report that the annual deficit has skyrocketed to $1.9 trillion, $ 400 billion more than expected in February. The forecast of this organization is that the deficit, despite Biden's proclamations that he is reducing it and will continue to do so, will skyrocket to 2.8 trillion in a decade if measures are not taken. In addition, the organization confirmed a slowdown in the national economy, placing the annual growth of the Gross Domestic Product (GDP) at 2%, compared to 3.1% in 2023.

The deficit skyrocketed due to aid to Ukraine, Israel and Taiwan

The Office explained that the deviation compared to February is mainly due to the approval of laws with aid to Ukraine, Israel and Taiwan. In addition, it warns that these rules will cause discretionary disbursements for a decade.

In CBO’s current projections, the deficit for 2024 is $0.4 trillion (or 27 percent) larger than it was in the agency’s February 2024 projections, and the cumulative deficit over the 2025–2034 period is larger by $2.1 trillion (or 10 percent). The largest contributor to the cumulative increase was the incorporation of recently enacted legislation into CBO’s baseline, which added $1.6 trillion to projected deficits. That legislation included emergency supplemental appropriations that provided $95 billion for aid to Ukraine, Israel, and countries in the Indo-Pacific region. By law, that funding continues in future years in CBO’s projections (with adjustments for inflation), boosting discretionary outlays by $0.9 trillion through 2034.

The deficit, above 5.5% in the next decade

In percentage terms, the 2024 deficit figures represent 7% of the Gross Domestic Product. According to CBO forecasts, in the next decade the percentage will not drop below 5.5% of GDP, when the average over the last 50 years had been 3.7%.

In CBO’s projections, the federal budget deficit in fiscal year 2024 is $1.9 trillion. Adjusted to exclude the effects of shifts in the timing of certain payments, the deficit amounts to $2.0 trillion in 2024 and grows to $2.8 trillion by 2034. With such adjustments, deficits equal 7.0 percent of gross domestic product (GDP) in 2024 and 6.5 percent of GDP in 2025. By 2027, as revenues increase faster than outlays, they drop to 5.5 percent of GDP. Thereafter, outlays generally increase faster than revenues. By 2034, the adjusted deficit equals 6.9 percent of GDP—significantly more than the 3.7 percent that deficits have averaged over the past 50 years.

CBO

Growth

This is not the only bad news for the US economy. CBP data confirms that the economy is slowing and will grow 2% in 2024 compared to 3.1% last year. The Office's projection is that growth will remain between 2 and 1.8% in the coming years, and indicates that immigration will continue to grow and drive the country's economic growth.

Economic growth is projected to slow from 3.1 percent in calendar year 2023 to 2.0 percent in 2024 amid higher unemployment and slightly lower inflation. CBO expects the Federal Reserve to respond by reducing interest rates, starting in early 2025. In CBO’s projections, economic growth remains steady at 2.0 percent in 2025 before settling at roughly 1.8 percent in 2026 and later years. A surge in immigration that began in 2021 continues through 2026, expanding the labor force and boosting economic output.

CBO

Inflation, the good news

The good news came in the face of one of the issues that most worries Americans: inflation. The CBO estimates that it will stabilize at 2.7% throughout 2024 (it is at 3.3% year-on-year at the moment) and that it will continue to reduce until it reaches the 2% target set by the Federal Reserve for 2026.

CBO

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