Student loan relief contributing to 27% jump in projected federal budget deficit, per CBO
The federal budget deficit will hit $1.9 trillion this fiscal year, according to an updated projection released Tuesday by the Congressional Budget Office. That’s 27% – or $400 billion – larger than the agency estimated in February.
Most of the spike stems from four factors that are expected to boost projected spending. The largest is a $145 billion increase due to changes the Biden administration made to student loan repayment plans and a new, proposed forgiveness program that would waive some accrued interest for millions of borrowers. The latter has yet to be finalized but could take effect as soon as this fall.
Also, the CBO increased the projected outlays for deposit insurance by about $70 billion because the Federal Deposit Insurance Corporation is not recovering disbursements it made when resolving five bank failures from the last fiscal year and this fiscal year as quickly as anticipated. Three of the five bank failures in 2023 were among the largest bank failures in US history. To replenish the multibillion-dollar hit to the FDIC’s Deposit Insurance Fund due to recent bank failures, the agency is temporarily levying higher fees on hundreds of insured banks and selling off failed banks’ assets.
Newly enacted legislation is increasing projected discretionary spending by $60 billion, and estimated spending on Medicaid is $50 billion higher because actual outlays so far in fiscal year 2024 have been larger than expected. The fiscal year began on October 1.
The cumulative deficit over the 2025 to 2034 period is now projected to be 10% – or $2.1 trillion – larger, the CBO said.
The nation’s ballooning budget deficits remain in the spotlight in this year’s presidential election, as presumptive nominees President Joe Biden and former President Donald Trump both promise to improve the nation’s fiscal status – but in very different ways.
Also, the imbalance between federal spending and tax revenue will factor heavily into Congress’ coming discussions on the fiscal year 2025 budget, the return of the debt ceiling in January, and the expiration of many provisions of the 2017 Tax Cuts and Jobs Act at the end of next year.
After adjusting to exclude timing shifts of certain payments, the CBO projects the deficit will be $2 trillion in fiscal year 2024 and grow to $2.8 trillion by fiscal year 2034.
In relation to economic output, federal debt held by the public will rise from 99% this fiscal year to 122% in fiscal year 2034, surpassing its historical peak, the agency said.
This story is developing and will be updated.
CNN’s Katie Lobosco and Elisabeth Buchwald contributed to this report.
Most of the spike stems from four factors that are expected to boost projected spending. The largest is a $145 billion increase due to changes the Biden administration made to student loan repayment plans and a new, proposed forgiveness program that would waive some accrued interest for millions of borrowers. The latter has yet to be finalized but could take effect as soon as this fall.
Also, the CBO increased the projected outlays for deposit insurance by about $70 billion because the Federal Deposit Insurance Corporation is not recovering disbursements it made when resolving five bank failures from the last fiscal year and this fiscal year as quickly as anticipated. Three of the five bank failures in 2023 were among the largest bank failures in US history. To replenish the multibillion-dollar hit to the FDIC’s Deposit Insurance Fund due to recent bank failures, the agency is temporarily levying higher fees on hundreds of insured banks and selling off failed banks’ assets.
Newly enacted legislation is increasing projected discretionary spending by $60 billion, and estimated spending on Medicaid is $50 billion higher because actual outlays so far in fiscal year 2024 have been larger than expected. The fiscal year began on October 1.
The cumulative deficit over the 2025 to 2034 period is now projected to be 10% – or $2.1 trillion – larger, the CBO said.
The nation’s ballooning budget deficits remain in the spotlight in this year’s presidential election, as presumptive nominees President Joe Biden and former President Donald Trump both promise to improve the nation’s fiscal status – but in very different ways.
Also, the imbalance between federal spending and tax revenue will factor heavily into Congress’ coming discussions on the fiscal year 2025 budget, the return of the debt ceiling in January, and the expiration of many provisions of the 2017 Tax Cuts and Jobs Act at the end of next year.
After adjusting to exclude timing shifts of certain payments, the CBO projects the deficit will be $2 trillion in fiscal year 2024 and grow to $2.8 trillion by fiscal year 2034.
In relation to economic output, federal debt held by the public will rise from 99% this fiscal year to 122% in fiscal year 2034, surpassing its historical peak, the agency said.
This story is developing and will be updated.
CNN’s Katie Lobosco and Elisabeth Buchwald contributed to this report.