US budget office sees larger 2024 deficit due to Ukraine aid, student debt
THE US national debt is on track to soar 27 per cent higher this fiscal year than previously forecast, the non-partisan Congressional Budget Office (CBO) said Tuesday.
In updated forecasts, the CBO said it now expects the federal budget deficit to be US$1.9 trillion in the 2024 fiscal year, which rises to around US$2.0 trillion when accounting for a shift in the timing of certain payments.
This is around US$400 billion higher than its previous forecast in February, and would leave the deficit equal to 7.0 per cent of gross domestic product (GDP), CBO director Phillip Swagel said in a statement.
Much of this increase from the February forecast comes from a projected US$145 billion rise in projected outlays related to student loans. This follows revisions to the costs of subsidies issued by the Biden administration, along with a rule it has proposed to reduce the balance of student loans.
But the rise also includes a number of other factors, including an increase of around US$60 billion this fiscal year due to recently enacted legislation like the security aid package for Ukraine, Israel and countries in the Indo-Pacific region, Swagel said.
According to the CBO forecasts, the net interest payments made on government debt is projected to rise to 3.1 per cent this year, and 3.4 per cent in 2025 - which would mark the highest interest cost in relation to GDP since records began in 1940.
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Over the next decade, the US deficit is projected to total US$24 trillion, about 70 per cent larger than the historical average over the past half-century, Swagel said.
As a result, federal debt held by the public is expected to rise from 99 per cent this fiscal year to 122 percent in 2034, according to the CBO.
The sharp rise in debt in both absolute terms and as a percentage of GDP has been tempered somewhat by a immigration increases in recent years
Net immigration between 2021 and 2026 is projected to be well above the historical average of around 200,000 people a year, which is expected to help temper the increase in debt, according to the CBO.
“The immigration surge is projected to increase the nation’s nominal GDP by a total of US$8.9 trillion, or 2.4 per cent, over the 2024-2034 period,” Swagel said, adding that this would lower the deficit by a net total of around US$900 billion. AFP
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