The U.S. budget deficit will jump to $1.915 trillion for fiscal 2024, topping last year's $1.695 trillion gap as the largest outside the COVID-19 era, the Congressional Budget Office said on Tuesday, citing increased outlays for student loans, Medicaid, bank failure costs and aid to Ukraine and Israel.
The CBO said these higher outlays would make up some 80% of a $408 billion increase in this year's projected deficit since February, when it forecast a $1.507 trillion deficit. If realized, the forecast would mean a second consecutive substantial deficit increase for U.S. President Joe Biden after deficits fell substantially in 2022 as COVID spending subsided.
For the fiscal 2025-2034 decade, the CBO raised its cumulative deficit forecast to $22.083 billion, up $2.067 trillion from the February projection.
The estimates are based on current tax and spending laws and assume that individual tax cuts passed by Republicans in 2017 will expire on schedule at the end of 2025. Tax experts estimate that making all of these cuts permanent, which Republican presidential candidate Donald Trump has proposed, would add another $4 trillion to the 10-year deficit.
The CBO, Congress' non-partisan budget referee agency, also updated its U.S. economic projections, increasing its calendar 2024 forecast for real gross domestic product growth to 2.0% from 1.5% in February, amid stronger-than-projected activity, job growth and inflation.
The CBO projects a lower unemployment rate for 2024 at 3.9% compared to 4.2% in February and includes no Federal Reserve interest rate cuts this year.
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