The numbers: The U.S. budget deficit is projected this year to come in slightly smaller than last year, the Congressional Budget Office estimated Wednesday, at about $1.6 trillion versus $1.7 trillion in 2023. Longer term, however, the deficit will continue to rise, reaching $2.6 trillion in 2034.
Key details: The CBO’s projections for the 2024 deficit and for longer-term deficits are smaller than estimates made in May 2023, due to the passage by Congress in June of a bill that imposed some limits on spending.
The agency sees revenues increasing faster than spending in 2026 and 2027, causing the deficit to shrink as a percentage of the economy, but it projects that spending will rise more quickly than revenues after 2027.
By 2034, the deficit is expected to be 6.1% of gross domestic product, much larger than the 3.7% that deficits have averaged over the past 50 years, the CBO said.
Big picture: Deficits will be boosted due to factors including net interest costs and the growth of federal healthcare costs per beneficiary, the CBO said. The agency’s director said in a statement that the growth of interest costs is equal to about three-quarters of the increase in the deficit from 2024 to 2034.
The latest figures come as Washington is facing the prospect of a partial government shutdown early next month. In January, lawmakers averted a shutdown by passing a measure funding the federal government through early March, buying themselves more time to hash out a bigger funding package.
President Joe Biden, meanwhile, is set to unveil his latest budget plan on March 11. His election-year document, however, is all but certain to be blocked in the Republican-controlled House of Representatives.