CBO projects $1.8 trillion deficit for fiscal 2024, largest since COVID By Reuters

By David Lawder

WASHINGTON (Reuters) – The Congressional Budget Office on Tuesday projected a $1.834 trillion U.S. federal deficit for fiscal year 2024, the largest in the post-COVID era, as debt interest costs rose sharply and spending on social security, Medicare and health insurance tax credits.

The estimate, which precedes the U.S. Treasury Department’s year-end budget report later this month, shows a deficit up 11 percent from the $1.7 trillion fiscal gap in 2023, but slightly smaller than the deficit of $1.9 trillion estimated in June by the CBO.

WHY IT’S IMPORTANT

US Vice President Kamala Harris says she would be more fiscally responsible as president than Republican rival Donald Trump, promising to fully offset new spending with tax hikes elsewhere. A fiscal think tank, the Committee for a Responsible Federal Budget, estimated Monday that Trump’s plans would add $7.5 trillion in new debt, more than twice the $3.5 trillion in Harris’ proposals .

But after a significant decline in the U.S. deficit in 2021 and 2022, as the economy recovered and COVID-19 rescue spending faded, deficits have grown significantly over the past two years, and CBO estimates that deficits “of baseline,” which assume no changes to current laws, want to raise $22 trillion over the next 10 years.

BY NUMBERS:

The CBO estimated that total revenue rose 11 percent to $4.918 trillion, supported by higher individual and corporate income taxes as economic growth remained strong. The nonpartisan budget arbiter agency estimated spending for the fiscal year ended Sept. 30 totaled $6.752 trillion, up 11 percent from fiscal 2023.

The largest increase in spending came from interest on the public debt, which rose 34 percent to $950 billion, while spending on Medicare, Social Security and the military also increased.

Year-over-year deficit comparisons were marred by the reversal of $330 billion in fiscal 2023 costs associated with President Joe Biden’s student loan forgiveness plan, which was struck down by the Supreme Court. Without the reversal, last year’s deficit would have exceeded $2 trillion.

KEY QUOTE

Some Republicans seized on the estimates to argue that Biden and Harris were fiscally irresponsible.

“President Biden and Vice President Harris have ignored the resounding messages from Iowans and Americans across the country, as well as the alarms from global credit rating companies. By consistently choosing a spendthrift agenda over fiscal sanity, this administration has crippled our economy for generations to come,” Republican. Senator Chuck Grassley said in a statement.