Grassley on CBO 10-Year Budget and Economic Outlook

WASHINGTON – The Congressional Budget Office (CBO) today released its Budget and Economic Outlook: 2024-2034. The report contains CBO’s projections for the federal budget and U.S. economy under current law for the next decade. Senate Budget Committee Ranking Member Chuck Grassley (R-Iowa) said of the report: 

“Congress ought to interpret CBO’s projections as a ‘call to action:’ the federal government must break from its irresponsible spending pattern. Otherwise, Americans will soon find themselves paying more to cover national debt and interest costs than to fund programs that matter.” 

Key Findings from CBO’s Report

Debt will reach a new record this decade. And it will only continue to climb. Publicly-held debt is projected to soar to 172 percent of GDP by 2054. That’s up from CBO’s estimate that publicly-held debt will be 99 percent of total GDP this year.  

Highest interest costs ever. Net interest costs have nearly doubled since President Biden took office, and they are expected to increase another 147 percent by 2034 as federal debt and interest rates climb. Starting this year, interest costs will surpass national defense spending. In 2025, they will make up a larger share of U.S. GDP than any other year on record. 

Deficits are large and getting larger. Federal budget deficits will exceed $1 trillion in every year of CBO’s projections. Cumulative deficits over the 2025 - 2034 window total $20 trillion. 

Budget caps rein in Biden’s deficit binge. CBO’s deficit projections slightly improved due to Congress passing the Fiscal Responsibility Act, which raised the debt limit and established discretionary guardrails. However, there’s still more to do. Congress must curb spending. On the current trajectory, by 2034, deficits will exceed levels only recorded during crises: the COVID-19 pandemic, the Great Depression and the aftermath of World War II. 

Inflation "Reduction" Act enhances inflation. CBO estimates key provisions of Democrats’ so-called Inflation Reduction Act will cost hundreds of billions more than initially expected. Despite the bill title, the nonpartisan agency said the legislation would drive inflation. President Biden publicly lamented naming the bill to indicate it would alleviate the inflation that has ballooned under his administration’s watch.  

Social Security and Medicare expenses trend upward. CBO expects Social Security and Medicare expenses will make up 67 percent of 2034 mandatory spending. Grassley has favorably recalled the Reagan-O’Neill approach to tackling Social Security: putting every option on the table and inviting real bipartisan negotiations. As a senior member and former chairman of the Senate Finance Committee, Grassley has long worked to improve Medicare through targeted policymaking. 

Major trust funds to deplete. Social Security’s Old-Age and Survivors Insurance Trust Fund will likely exhaust its balance in 2033, and the Highway Trust Fund, in 2028. These programs won't be able to make full payments under existing law.