The Congressional Budget Office released an updated projection indicating that the federal budget deficit is expected to hit $1.9 trillion in the current fiscal year, which is $400 billion larger than previously estimated. Looking ahead to fiscal year 2034, the nation's debt is projected to approach $57 trillion, nearly $2.5 trillion higher than earlier projections.
The increase in the deficit for fiscal year 2024 is attributed to several factors, including changes to student loan repayment plans and a proposed forgiveness program by the Biden administration. Additionally, higher outlays for deposit insurance and increased discretionary spending are contributing to the growing deficit.
The CBO highlighted that the cumulative deficit over the 2025 to 2034 period is now projected to be $2.1 trillion larger. The ballooning budget deficits have become a focal point in the current presidential election, with candidates proposing different approaches to address the nation's fiscal challenges.
Congress will need to address the fiscal year 2025 budget, the return of the debt ceiling in January, and the expiration of provisions of the 2017 Tax Cuts and Jobs Act. Over $3.4 trillion in individual income and estate tax cuts are set to expire at the end of 2025, potentially impacting the deficit by $4.6 trillion when considering corporate tax changes and interest.
The CBO projects that the deficit will grow to $2.8 trillion by fiscal year 2034, with federal debt held by the public rising from 99% to 122% of economic output. The worsening outlook for the nation's debt challenge underscores the need for a national conversation on addressing fiscal and economic challenges in the coming years.
