The federal budget deficit will be $1.6 trillion in fiscal 2024, the Congressional Budget Office estimated Wednesday, and annual shortfalls will grow over the next decade as the country faces a fiscal reckoning.
The $1.6 trillion figure is down slightly from fiscal 2023’s deficit of $1.7 trillion. That is in part because of last year’s Fiscal Responsibility Act, a bipartisan deal that capped discretionary spending as part of the debt limit negotiations. While that is a decrease, the budget deficit is still historically high.
The law lopped off an estimated $100 billion from this year’s deficit, according to the congressional scorekeeper. Over the next decade, the CBO predicts that the cumulative deficit will be $1.4 trillion, or 7% lower than its estimate from last May.
While the federal deficit is expected to wane slightly in 2024, over the long run, deficits are projected to rise by a substantial margin. Over the next decade, the budget deficit will grow by 62% to nearly $2.6 trillion in fiscal 2034.
Over the next 10 years, annual deficits are expected to be between 5.2% and 6.1% of gross domestic product.
The rising deficit reflects several factors, but an increase in the cost of paying interest on the debt will account for three-quarters of the growth.
“Also boosting deficits are two underlying trends: the aging of the population and growth in federal health care costs per beneficiary,” CBO Director Phillip Swagel said in written remarks obtained ahead of the release of the updated projections. “Those trends put upward pressure on mandatory spending.”
The debt is set to rise to record levels in the coming years as well.
Debt held by the public will rise each year, from 99% of GDP this year to 116% over the next decade, the highest level in history.
The latest update is another warning that the U.S. fiscal situation is on a path that most economists would say is unsustainable.
“Policymakers need to take this somber moment to reflect on the grave situation we face and commit themselves to do better,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “Last year’s Fiscal Responsibility Act was a good start, but there is so much more to be done.”
The White House said on Wednesday that the data show evidence that the economy is strong and that the deficit has been reduced with President Joe Biden in the Oval Office.
“President Biden’s policies would reduce the deficit further by making the wealthy and big corporations pay their fair share and cutting wasteful spending on special interests,” said White House spokesman Michael Kikukawa. “Congressional Republicans want to double down on MAGAnomics with more than $3 trillion in tax cuts skewed to the wealthy, which are already responsible for 90% of the nonemergency increase in the debt-to-GDP since 2001.”
Republicans and fiscal conservatives have knocked Democrats and the Biden administration for not doing enough to address the deficit and national debt.
Rep. Jodey Arrington (R-TX), chairman of the House Budget Committee, used the report to praise the deficit reductions from the Fiscal Responsibility Act while bashing President Joe Biden.
“While our debt trajectory remains unsustainable driven by Biden’s executive actions, mandatory spending, and interest on our debt, the Republican-led debt ceiling deal to reduce discretionary spending has strengthened our balance sheet,” Arrington said.
In his first floor speech as leader of the House, Speaker Mike Johnson (R-LA) drew attention to the fiscal situation. He proposed a bipartisan fiscal commission that would work to tame the country’s deficits and burgeoning national debt.
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“The consequences if we don’t act now are unbearable,” Johnson said, imploring lawmakers to act. “We have a duty to the American people to explain this to them so they understand it well.”
Last month, the House Budget Committee advanced bipartisan legislation that would create a panel consisting of both Republican and Democratic lawmakers from both chambers of Congress and outside experts, with the goal of fiscal stability.
