CBO projects US debt to grow $23.9 trillion in 10 years, not including costs of extending tax cuts
CBO projects US debt to grow $23.9 trillion in 10 years, not including costs of extending tax cuts
WASHINGTON (AP) — The national debt is slated to rise by $23.9 trillion over the next decade, a sum that does not include trillions of dollars in additional tax cuts being championed by President-elect Donald Trump.
The nonpartisan Congressional Budget Office released its 10-year budget outlook on Friday that showed a slightly brighter picture as higher taxable incomes will relieve some pressure on the rising national debt. Still, annual budget deficits are expected to be equal to 6.1% of U.S. gross domestic product in 2035, which the CBO noted is “significantly more than the 3.8 percent that deficits have averaged over the past 50 years.”
The analysis paints a difficult picture for an incoming Republican administration bent on cutting taxes in ways that further widen deficits unless they’re also paired with major spending cuts. Trump’s proposed extension of his 2017 tax cuts that are set to expire after this year along with new cuts could easily exceed $4 trillion and his nominee to be treasury secretary, Scott Bessent, warned Thursday that the economy could crash without them.
“We do not have a revenue problem in the U.S.,” Bessent insisted at his confirmation hearings. “We have a spending problem.”
CBO Director Phillip Swagel told reporters at a press conference Friday that net interest costs are a major contributor to the deficit and “in the coming years, net interest costs are projected to be similar to the amounts of discretionary spending for either defense or non-defense” programs.
The CBO numbers suggest more bluntly that there is a persistent and possibly worsening gap between the taxes that Americans are willing to pay and the services they expect government to provide. The CBO noted that cumulative deficits from 2025-2034 would be smaller by $1 trillion relative to its June forecast, largely because the amount of taxable income is expected to increase.
Still, the budget deficit is expected to be $1.87 trillion this year, a slight decline from the $1.91 trillion shortfall last year.
Deficits as share of the total economy would then narrow through 2027 as tax collections would increase faster than outlays, a trend that would then reverse as spending grew faster due to the costs of Social Security, Medicare and servicing the national debt.
The federal government is poised to spend $7 trillion this fiscal year, a sum that would equal about 23.3% of GDP.
While tax revenues as a share of the total U.S. economy are close to the 50-year average, government spending is poised to continue growing. Discretionary spending on national security and social programs will account for $1.85 trillion next year. The CBO already has spending in these categories on a downward trajectory as discretionary spending would equal 5.3% of GDP, down from the half-century average of 7.9%.
With an aging population, government spending would largely increase because of Social Security and Medicare — two programs popular with voters that many Republicans and Democrats alike have vowed to protect, despite clear signs that they’re on an unsustainable path.
Swagel said. “We’re already an aging society and the aging of our society is driving mandatory outlays.”
And as American women wait later in life to have children and have fewer of them, “the change of fertility sometimes accelerates that pattern of the aging of our society,” he said.
Michael Peterson, CEO of the Peter G. Peterson Foundation — which among other things tracks the federal debt — said in a statement that “as lawmakers consider the range of expiring tax policy at the end of the year, they should make a commitment to at least ‘do no fiscal harm’.”
“They should avoid budget gimmicks and base their assumptions on neutral, nonpartisan estimates like this one from CBO,” he said.
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Associated Press reporter Fatima Hussein contributed to this report.
By JOSH BOAK
Associated Press
