© Reuters. Stacks of moving crates sit in a U.S. Congressional office weeks before the end of the current term, as dozens of outgoing and incoming members of Congress move into and out of Washington as votes on a potential federal government shutdown loom, on Capito
By David Lawder
WASHINGTON (Reuters) -The U.S. Congressional Budget Office on Wednesday projected a slightly smaller $1.507 trillion federal deficit for fiscal 2024 as increased revenues from a strong economy and employment offset higher outlays for clean energy tax credits and public debt interest.
The CBO said the deficit would dip this year from $1.695 trillion in fiscal 2023, but resume its march upward to $1.772 trillion in fiscal 2025, hitting $2.579 trillion in fiscal 2034.
The figures are based on current tax and spending laws and assume individual tax cuts passed by Republicans in 2017 expire at the end of 2025, pushing revenues higher in later years.
The CBO also projected a slightly smaller cumulative 10-year deficit, to $20.016 trillion for the fiscal 2025-2034 period, compared with last year’s estimate of a $20.314 trillion deficit for 2024-2033.
The report shows little shift in the overall U.S. budget trajectory as Congress struggles to reach consensus on issues such as aid for Ukraine and Israel as well funding for government agencies.
MORE WORKERS, TAXES
The CBO said caps on discretionary spending on government agencies and programs passed last year would hold down the deficits by $2.6 trillion over the next year.
“In our projections, the deficit is also smaller than it was last year because economic output is greater, partly as a result of more people working,” CBO Director Phillip Swagel said in a statement.
The non-partisan budget referee agency is projecting an increased workforce of 5.2 million people, mostly due to net immigration, which will boost economic output by $7 trillion and tax revenues by $1 trillion over the 2023-2034 period, he said.
It projected that U.S. full-year economic growth would fall to 1.8% in calendar 2024 from 2.5% in 2023, but then climb back above 2% in 2025 and 2026 in response to interest rate cuts by the Federal Reserve later this year.
The CBO also highlighted rising net interest costs that are eating up a larger share of the budget. Net interest costs are expected to reach $870 billion, or 3.1% of GDP in 2024, but nearly double by 2034 to $1.628 trillion, or 3.9% of GDP.
The CBO revised upward its projections of the cost of the Biden administration’s clean energy tax credits, as well as the reductions of gasoline tax revenues because of new emissions standards expected to accelerate the shift to electric vehicles.
Together these changes will raise the deficit by $25 billion in fiscal 2024 and $428 billion over the 2024-2033 period, CBO said.