CBO Releases February 2024 Budget and Economic Outlook

The Congressional Budget Office (CBO) just released its February 2024 Budget and Economic Outlook, its first full ten-year baseline and economic forecast since May 2023. CBO's new budget projections show that the fiscal outlook has improved due to enactment of the Fiscal Responsibility Act, but remains unsustainable. Specifically, CBO projects that federal debt held by the public will reach a new record of 106.3 percent of Gross Domestic Product (GDP) by the end of Fiscal Year (FY) 2028 and reach 116 percent of GDP by the end of 2034. Budget deficits, meanwhile, will average $2.0 trillion per year – or 5.7 percent of GDP – over the next decade. 

CBO's new baseline incorporates legislation and executive actions put into place since last February. CBO also accounts for a higher update of the cost of the Employee Retention Credit, lower capital gains collections, a slowdown in inflation, higher interest rates, increased immigration, stronger economic growth, and other actual and expected changes.

Under current law, CBO projects the budget deficit will fall from $1.7 trillion (6.3 percent of GDP) in FY 2023 to $1.5 trillion (5.3 percent of GDP) in 2024 before rising to $1.8 trillion (6.1 percent of GDP) in 2025 and $2.6 trillion (6.2 percent of GDP) in 2034. Deficits will total $20.0 trillion (5.7 percent of GDP) over the FY 2025 to 2034 budget window. 

Federal debt held by the public will grow by $21 trillion through FY 2034 under CBO's baseline, rising from $27 trillion today to $48 trillion by the end of 2034. As a share of GDP, debt will rise from 97 percent of GDP at the end of 2023 to 106.3 percent by 2028 – surpassing the prior record set just after World War II – and 116 percent of GDP by 2034. 

Rising debt under CBO's baseline is driven by a large disconnect between spending and revenue, which is due in part to growing interest costs. 

Interest on the debt nearly doubled from $345 billion in FY 2020 to $659 billion in 2023, and CBO projects it will double again to $1.3 trillion by 2031. As a share of the economy, interest will reach a record 3.3 percent of GDP by 2026 and 3.9 percent of GDP – or $1.6 trillion – by 2034.

Over the next decade, spending on mandatory programs and interest will exceed revenue collection, meaning every dollar spent on appropriations will come from borrowed funds.

CBO also projects two major trust funds will be insolvent over the next decade – the Highway Trust Fund in 2028 and the Social Security Old Age and Survivors Trust Fund in 2033. Upon insolvency, the law requires benefits to be cut across the board. 

The Committee for a Responsible Federal Budget has put out a press release on CBO's new baseline and will publish our full analysis of CBO's Budget and Economic Outlook later today.