US budget office sees larger 2024 deficit due to Ukraine aid, student debt

The US national deficit is on track to soar 27 percent higher this fiscal year than previously forecast, the non-partisan Congressional Budget Office (CBO) said Tuesday.

In updated forecasts, the CBO said it now expects the federal budget deficit to be $1.9 trillion in the 2024 fiscal year, which rises to around $2.0 trillion when accounting for a shift in the timing of certain payments.

This is around $400 billion higher than its previous forecast in February, and would leave the deficit equal to 7.0 percent of gross domestic product (GDP), CBO director Phillip Swagel said in a statement.

Much of this increase from the February forecast comes from a projected $145 billion rise in projected outlays related to student loans. This follows revisions to the costs of subsidies issued by the Biden administration, along with a rule it has proposed to reduce the balance of student loans.

But the rise also includes a number of other factors, including an increase of around $60 billion this fiscal year due to recently enacted legislation like the security aid package for Ukraine, Israel and countries in the Indo-Pacific region, Swagel said.

According to the CBO forecasts, the net interest payments made on government debt is projected to rise to 3.1 percent this year, and 3.4 percent in 2025 -- which would mark the highest interest cost in relation to GDP since records began in 1940.

Over the next decade, the US deficit is projected to total $24 trillion, about 70 percent larger than the historical average over the past half-century, Swagel said.

As a result, federal debt held by the public is expected to rise from 99 percent this fiscal year to 122 percent in 2034, according to the CBO.

The sharp rise in debt in both absolute terms and as a percentage of GDP has been tempered somewhat by a immigration increases in recent years

Net immigration between 2021 and 2026 is projected to be well above the historical average of around 200,000 people a year, which is expected to help temper the increase in debt, according to the CBO.

"The immigration surge is projected to increase the nation's nominal GDP by a total of $8.9 trillion, or 2.4 percent, over the 2024–2034 period," Swagel said, adding that this would lower the deficit by a net total of around $900 billion.