In a move that has caught many on Capitol Hill by surprise, the Congressional Budget Office has announced that its projection for this fiscal year’s federal deficit is now at least $400 billion higher than earlier thought.
Just four months ago, in February, the agency forecast a deficit of some $188 billion, and attributed the lower deficit to increased Internal Revenue Service collections.
Now the latest projects issued by the CBO says that increased military aid to Israel and Ukraine, along with stepped-up Medicaid spending, and the probable costs of reducing student loan borrowing balances, among other factors, have all played a part in what is a 27% increase in the federal budget deficit.
In its Update to the Budget and Economic Outlook: 2024 to 2034, the CBO says the current budget deficit is $1.9 trillion. “Adjusted to include 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,” says the document.
Put another way, “Debt held by the public rises from 99% of Gross Domestic Product this year to 122% in 2034, surpassing its previous high of 106% of GDP.”
The only marginal good news is that a current deficit comprising 7% GDP is expected to decline to 5.5% by the year 2027. That figure, however, is significantly higher than the 3.7% deficit figure that has been the rough average since the 1980s.
While the Congressional Budget Office has recorded an ongoing increase in tax revenue, Texas Republican Congressman Jody Arrington said it’s clear that such revenue isn’t enough to offset continued higher deficits.
The chairman of the House Budget Committee, Arrington remarked that new spending is “undermining the prowess of the U.S. economy, further eroding consumer confidence, and fueling the cost-of-living crisis for American families.”
“The United States is on a pace to add trillions of dollars to its national debt over the next decade,” the New York Times reported in response to the new CBO numbers, “borrowing money more quickly than previously expected, at a time when big legislative fights loom over taxes and spending.”
The increased deficit, charges the National Review, is due to a “combination of policy changes and a gloomier than previously expected economic forecast.” The publication goes on to predict that “given the swelling debt burden and higher rates, interest payments will surpass $1 trillion next year.”
In a statement, Andrew Bates, White House deputy press secretary, contended that the new CBO numbers underline the need for a Biden administration proposal to raise taxes on wealthier households and corporations.
The President knows, said Bates, “that the last thing we should do is flood Main Street with debt so that Park Avenue can bathe in tax welfare and greedflation.” The CBO report “is a warning against exactly that.”
By Garry Boulard
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