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The nonpartisan Congressional Budget Office said Wednesday that the United States is on pace to add nearly $19 trillion to its national debt over the next decade as the rising costs of an aging population and higher interest expenses are straining the country’s fiscal outlook.
But the report offered a little solace: Recently enacted legislation to curb federal spending and a U.S. economy that is growing faster than expected are making the fiscal picture a little less bleak. The annual deficit over the next decade is 7 percent less than last year’s Budget Office forecast of $20.3 trillion.
This decline reflects several conflicting forces. Last year, President Biden and congressional Republicans reached a deal to limit discretionary spending for two years, which would reduce the deficit over the course of the decade. So the labor force increased by 5.2 million new workers, most of whom are immigrants.
But the decline in those deficits has been partially offset by projected budget cost increases from Mr. Biden’s clean-energy agenda, a growing U.S. population and higher interest rates on the national debt.
Director of the Budget Office, Philip L. Swagel said that despite the decline in the deficit, the country is on track to accumulate more debt as a share of its total economic output in 2034 than at any other time in its history.
“The first message of the projections is a familiar one: The fiscal trajectory is challenging,” Mr. Swagel said in a briefing with reporters on Wednesday. “On the other hand, it is slightly less bad than our projections last year.”
These projections for the country’s fiscal health come as Congress faces another deadline next month to agree on federal spending legislation to keep the government running. Lawmakers are engaged in heated debate over providing more aid to Ukraine and Israel and over expanding the child tax credit and restoring expired business tax exemptions. The Budget Office projected that the annual deficit would increase from $1.6 trillion to $2.6 trillion in 2034. The year added $18.9 trillion to the national debt during the decade. By then, the debt is estimated to exceed $54 trillion.
Interest rates have reached their highest level in two decades over the past year, making borrowing costs an increasingly important contributor to the national debt.
From 2024 to 2034, the United States will spend more than $12 trillion on interest costs alone. Starting next year, net interest costs as a share of the U.S. economy will be higher than at any time since the federal government began keeping records in 1940, according to the Budget Office.
Spending on safety net programs like Social Security and Medicare is increasing, even as their trust funds face the prospect of being exhausted within the next 10 years.
“Also fueling the deficit are two underlying trends: an aging population and rising federal health care costs per beneficiary,” Mr. Swagel said. “Those trends put pressure on mandatory spending.”
The national debt is likely to be even larger than the Budget Office predicted, because its forecast assumes that the 2017 tax cuts enacted by Republicans will expire in full, although lawmakers have already extended several measures, including lower individual income tax brackets. Are considering doing.
For the second time in less than a year, the budget office said it now expects Mr. Biden’s efforts to wean the country off fossil fuels will be more popular with the public — and more expensive for taxpayers — as they begin was estimated in.
Mr Biden’s 2022 Inflation Reduction Act included the largest stimulus in US history to accelerate the development and deployment of energy technologies. Those incentives included tax breaks for companies investing in factories to produce wind turbines, solar panels and other clean-energy technologies, as well as a credit of up to $7,500 for people buying certain electric vehicles.
The Budget Office initially projected those breaks and other climate provisions would add $391 billion to the deficit from 2022 to 2031. He now estimates that the actual cost will be at least double when measured over the same time window.
The change is partly because the office now anticipates stronger demand for energy manufacturing credits than initially anticipated. It’s also partly the result of Mr Biden’s other policies: a proposed Environmental Protection Agency regulation that aims to ensure that two-thirds of new passenger cars sold in the US will be fully electric by 2032. The office hopes the regulation will increase demand for electric vehicles and reduce the amount of gasoline consumed by American drivers – which, in turn, will reduce federal revenue from gasoline taxes.
Republican lawmakers immediately expressed concern about the growing debt burden and blamed Mr. Biden and the Democrats, despite the fact that both parties have passed spending and tax packages that have increased the nation’s debt.
Speaker Mike Johnson said in a statement, “The economic damage and uncontrolled spending that occurred while Democrats controlled Washington, which increased costs for the American people and increased our national debt, confronts us with today’s harsh reality “
Democrats focused on more positive features of the economy and the fact that the deficit was lower than previously expected.
Senator Sheldon Whitehouse of Rhode Island, Democratic chairman, said, “Today’s CBO baseline confirms that Democrats’ investments to jump-start our recovery and foster a strong economy have worked: CBO now expects faster economic growth. , is projecting lower deficits and lower unemployment.” Senate Budget Committee.
The Biden administration, which will unveil its next budget proposal next month, has defended its efforts as fiscally and environmentally responsible.
Treasury Secretary Janet L. Yellen told lawmakers on Tuesday that interest costs remain manageable as a share of the overall U.S. economy and noted that Mr. Biden had proposed $2.5 trillion in deficit reduction, most of which would come from tax increases and more stringent Will come from perspective. For tax collection.
“We need to stay on a fiscally sustainable path, and reducing the deficit is critical to ensuring that,” Ms. Yellen said. He expressed regret that lawmakers have not acted on the administration’s deficit reduction plans.
The U.S. gross national debt topped $34 trillion last month, and fiscal watchdog groups are pressuring lawmakers to create a fiscal commission that would develop policies to stabilize the debt.
“Today’s CBO estimates are the latest loud and clear warning about America’s unsustainable national debt,” Michael A. Peterson, chief executive of the Peter G. Peterson Foundation, which promotes deficit reduction, said in a statement. “There has never been a more urgent time for a bipartisan Fiscal Commission to recommend solutions to get us on a stronger path.”
