US CBO Forecasts Slightly Smaller $1.5 Trillion Deficit for 2024
US Congressional Budget Office’s Projections
The U.S. Congressional Budget Office projected a slightly smaller $1.507 trillion federal deficit for fiscal 2024. This was attributed to increased revenues from stronger growth and employment, which offset higher costs for clean energy tax credits and public debt interest.
Deficit Projections and Legislation Impact
The CBO stated that the deficit would decrease this year from $1.695 trillion in fiscal 2023, but it would resume its upward trend to $1.772 trillion in fiscal 2025, reaching $2.579 trillion in fiscal 2034. These figures are based on current tax and spending laws and assume that individual tax cuts passed by Republicans in 2017 expire at the end of 2025, pushing revenues higher in later years.
Impact of Legislation on Deficit
The CBO also projected a slightly smaller cumulative 10-year deficit, amounting to $20.016 trillion for the fiscal 2025-2034 period. This is compared with last year’s estimate of a $20.314 trillion deficit for 2024-2033. The lower longer-term deficit projections were attributed to legislation passed last June to impose caps on discretionary spending programs, which reduced the 10-year deficit by $2.6 trillion from projections a year ago.
Political Reactions and Credit Claims
Both Republicans and Democrats sought to take credit for the slightly improved fiscal outlook. House of Representatives Budget Committee Chairman Jodey Arrington claimed that Republicans’ insistence on spending cuts had strengthened the U.S. balance sheets. On the other hand, Senate Budget Committee Chairman Sheldon Whitehouse attributed the improvement to economic growth sparked by President Joe Biden’s economic policies.
Factors Affecting Deficit
According to CBO Director Phillip Swagel, the deficit is smaller than last year due to greater economic output, partly resulting from more people working. The nonpartisan budget referee agency projected an increased workforce of 5.2 million people, mostly due to a surge in net immigration, which will boost economic output by $7 trillion and tax revenues by $1 trillion over the 2023-2034 period.
Impact of Clean Energy Tax Credits
The CBO revised sharply upward its projections of the cost of the Biden administration’s clean energy tax credits, as well as the impact of planned changes to vehicle emissions standards expected to accelerate the shift to electric vehicles and cut gasoline tax revenues. Together, these changes will raise the deficit by $25 billion in fiscal 2024 and $428 billion over the 2024-2033 period, as per the CBO’s estimates.
