The New CBO Budget Report is Out.
by EricCartman (2024-02-07 14:31:06)
Edited on 2024-02-07 14:53:32

The report has a nice table that summarizes cash inflows and outflows 10 years out.

Revenue for FY23 was 0.8% below the historical average of 17.3% of GDP (16.5% in FY23). That number improves a bit over the next 10 years, rising to 17.9% in FY34.

The expense side is ugly, as we spent 22.7% of GDP in FY23, which increases steadily to 24.1% in FY34.

Mandatory spending and net interest expense are the main drivers of the increase, while discretionary spending declines from 6.4% to 5.1% (driven by both defense and non-defense spending). Note that interest rates are projected to come down during this period to 2.9% on the FFR, while the 10yr remains flat at ~4.0%. The issue is the amount of debt that we are taking on is pushing our interest expense higher, as debt held by the public increases from 97.3% of GDP to 116% in FY34.

The section on the deficit is depressing. No one has a plan to address what is the most obvious issue of our time.

Deficits

In CBO’s projections, the federal budget deficit grows from $1.6 trillion in fiscal year 2024 to $2.6 trillion in 2034. Deficits also expand in relation to the size of the economy, from 5.6 percent of gross domestic product (GDP) in 2024, when the collection of certain postponed tax payments temporarily boosts revenues, to 6.1 percent of GDP in 2025. In 2026 and 2027, revenues increase faster than outlays, causing the deficit to shrink to 5.2 percent of GDP by 2027. Thereafter, outlays rise faster than revenues. By 2034, the deficit returns to 6.1 percent of GDP—significantly larger than the 3.7 percent that deficits have averaged over the past 50 years.







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