06.18.24

CBO: National Debt to Reach Record Share of GDP in Just Three Years

Grassley on latest 10-year budget and economic outlook report

WASHINGTON – Senate Budget Committee Ranking Member Chuck Grassley (R-Iowa) today issued a statement on the Congressional Budget Office (CBO)’s new 10-year budget and economic outlook. 

“Congressional Democrats and the White House ought to read this report cover to cover. After reviewing the data, it’d be unthinkable for anyone to consider continuing down the current fiscal path,” Grassley said. “The Biden administration has saddled generations of Americans with inflationary conditions and astronomical interest rates. The CBO’s long-term outlook leaves Washington bureaucrats with one viable option: to quit wasting taxpayers’ money and start making some sane spending decisions.” 

CBO’s latest report, “An Update to the Budget and Economic Outlook: 2024 to 2034,” shows how the budget and economy will look under existing laws for the next decade.  

Findings Overview

Debt and Deficits Rise

  • At seven percent of GDP, the Fiscal Year 2024 deficit is projected to be larger than all but five years since 1946. Those five followed historic financial crises.
  • Debt held by the public is projected to increase from $26.2 trillion (97.3 percent of GDP) in 2023 to $50.7 trillion (122.4 percent of GDP) in 2034. The “debt-to-GDP” ratio will overtake its all-time high by 2027 and rise from there.
  • The annual budget deficit is projected to reach $2 trillion this fiscal year and grow to $2.8 trillion by 2034.
  • Cumulative deficits from 2025 to 2034 total $22.1 trillion. That’s $2.1 trillion – or 10 percent – higher than previously projected.

Interest Costs Soar

  • Net interest costs are expected to grow from $658 billion in 2023, to $892 billion this year, to more than $1 trillion in 2025. By 2034, net interest costs will be more than $1.7 trillion.
  • Interest spending rivals Medicare for spot as second single-largest federal expenditure, behind only Social Security. 
  • Interest on the debt is projected to exceed spending on national defense this year.
  • Starting in 2025, annual interest costs will be the greatest ever in relation to GDP.  

Federal Spending Hurls Toward Historic Levels

  • Federal spending makes up about a quarter of today’s economy (23.9 percent). That’s higher than every other year since World War II with the exception of four years – two of which were also under President Biden’s watch.
  • By the end of 2034, spending in relation to GDP will be the highest in history outside of World War II and the COVID-19 global health emergency.

** Revenues are on track to significantly exceed the historic average, yet they won’t pace with spending on mandatory programs and interest on the debt.

Executive Actions Alone Push Spending, Deficits Higher 

  • This report factors in new, unlegislated spending from Biden administration actions that total billions of dollars, including:
    • Additional student loan forgiveness;
    • Medicaid payment increases; and
    • Environmental Protection Agency vehicle emissions regulations.

Major Trust Funds Head Toward Insolvency 

  • Social Security’s “Old Age and Survivors Insurance” trust fund will exhaust its balance in 2033.
  • The Highway Trust Fund will exhaust its balance in 2028.

**When the above funds exhaust their balances, the programs will have to cut spending to match their dedicated revenues under current law. 

Biden’s Open Border Impacts State, Local Finances 

  • President Biden has allowed nearly 10 million illegal immigrants to enter our nation through the southern border since taking office. CBO takes this unprecedented surge into account, noting the cost burdens states will bear as a direct result.

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