Early in February, the Congressional Budget Office released its annual budget outlook containing projections of revenues, outlays and deficits over the next 10 years. It was not pretty.
Then in June, the office issued its customary mid-year update, in which the skies darkened materially. Now might be a good time to grab a strong cup of coffee.
The updated report forecasts a budget deficit of $1.9 trillion for Fiscal 2024 ending Sept. 30, swelling to $2.8 trillion by 2034. As legendary Illinois U.S. Sen. Everett Dirksen reportedly quipped “A billion here, a billion there, and pretty soon you’re talking real money.” The annual shortfall in 10 years will be 2.8 thousand billion.
The national debt is the net sum of annual deficits and surpluses over all time and is best compared with the size of the overall economy measured as a percentage of gross domestic product, but that won’t make you feel any better. Total debt this year will end up around $28 trillion, or 99% of GDP. For comparison, the highest level ever was the in the immediate aftermath of WWII, reaching 106% of GDP at a time when half of all U.S. output was dedicated to defeating fascism. The Congressional Budget Office expects the debt to exceed the previous peak by 2027 and reach 122% of GDP in 2034.
Depressing as that sounds, the reality is worse. The Congressional Budget Office is required to make its 10-year forecast based on current law regarding taxes and spending, which assumes tax cuts passed in 2017 are allowed to expire as scheduled at the end of 2025. If they are extended by Congress as seems likely, the debt would rise by an additional $4 trillion in 2034.