The US budget deficit is projected to expand over 60 percent in the coming decade, the Congressional Budget Office (CBO) said Wednesday, citing rising interest costs and health care spending as key factors.
The deficit is expected to grow from $1.6 trillion in 2024 to $2.6 trillion in 2034, CBO director Phillip Swagel said in a statement.
Measured relative to economic output, deficits are expected to be significantly larger than the historical average in recent decades, he said.
Similarly, debt held by the public is expected to rise from 99 percent of gross domestic product to 116 percent — the highest on record.
The CBO, a nonpartisan office in Congress, released its report as US lawmakers struggle to reach an agreement on full-year government funding.
Swagel said that net interest costs are projected to make up some three-quarters of the increased deficit between 2024 and 2034.
A greying population and uptick in federal health care costs will also add to deficits, given that these trends boost spending needs.
But the Fiscal Responsibility Act, signed last year by President Joe Biden as lawmakers moved to avert a default, is a key reason behind a slightly smaller than projected deficit from 2024 to 2033, said the CBO.
Besides suspending the limit on federal debt, the act made changes impacting federal spending and revenues.
Immigration is expected to be another mitigating factor, bolstering labor force numbers and economic output.
“The labor force in 2033 is larger by 5.2 million people, mostly because of higher net immigration,” said Swagel of the CBO’s projections.
But higher interest rates and greater than estimated costs of “energy-related tax provisions” offset some of these effects.
Deficits as a percentage of GDP are set to climb after 2028, hitting 6.1 percent in 2034, according to the CBO.
“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,” the report added.
