Federal budget analysts said Wednesday that debt held by the U.S. public is on track to hit a record high in the coming years because the federal budget deficits are projected to climb over the next decade.
The Congressional Budget Office (CBO) projected the debt held by the public will rise significantly over the next decade, climbing from 99 percent of GDP in 2024 to 116 percent in 2034. The jump would mark a high-water mark, the CBO said, while noting that, absent policy changes, the debt is likely to continue the upward trajectory after 2034.
Federal outlays are also expected to rise after 2028, the CBO said, while pointing to increased spending on programs like Social Security and Medicare and higher net interest costs.
“Starting next year, net interest costs are greater in relation to GDP than at any point since at least 1940, the first year for which the Office of Management and Budget reports such data,” the CBO said.
The CBO projected the federal budget deficit would reach $1.6 trillion in fiscal 2024, which ends in late September, and mostly rise through 2034, when it’s expected to hit $2.6 trillion. The office said the projected deficit for 2024 is about $100 billion less than its estimate from last spring.
The CBO said the changes in its projections were partly due to lower discretionary spending stemming from a budget caps deal negotiated between former Speaker Kevin McCarthy (R-Calif.) and President Biden last year known as the Fiscal Responsibility Act.
The CBO projected the cumulative deficit to hit $20 trillion between 2025 and 2034, which the office also said is 7 percent, or $1.4 trillion, below its projections from May 2023.
In relation to the gross domestic product, the CBO said the deficit “amounts to 5.6 percent in 2024, grows to 6.1 percent in 2025, and then shrinks to 5.2 percent in 2027 and 2028.”
“After 2028, deficits climb as a percentage of GDP, returning to 6.1 percent in 2034,” the office said, adding that “since the Great Depression, deficits have exceeded that level only during and shortly after World War Il, the 2007-2009 financial crisis, and the coronavirus pandemic.
The report comes as Congress has been embroiled in a months-long spending fight that could heat up in the weeks ahead as lawmakers try to strike a deal on government funding for fiscal 2024.