Waste of the Day: Projections Show Deficit Down but Taxes, Spending Up

Topline: The federal deficit will be $21.1 trillion in the 10-year period from 2025 to 2034, according to projections in the Congressional Budget Office’s biannual “Budget and Economic Outlook” report. The number is $1 trillion less than the estimate from June 2024, but is coupled with an anticipated increase in government spending.

Projected deficit decline is only because taxes should increase faster than spending

Key facts: A reduced deficit projection is exciting on the surface, but the underlying math might raise some alarm bells.

The deficit, of course, is the difference between how much the government spends and how much it collects from taxes and other revenues. The last time the government did not have a deficit, Bill Clinton was president.

In June 2024, the CBO predicted the government would bring in $65.6 trillion in revenue in the next 10 years. Now, the CBO expects the government to collect $67.5 trillion of revenue due to expected increases in payroll taxes and income taxes.

The CBO also increased its projections of government spending. The group now expects Washington to spend $89.3 trillion in the next 10 years, compared to the $88.4 trillion prediction from June 2024.

The predictions are current as of Jan. 6 and assume that “current laws governing revenues and spending generally remained unchanged,” so they do not account for possible changes under the administration of Donald Trump and future presidents.

The CBO also found that the federal debt was $35.2 trillion in 2024 and expects it to reach $59.2 trillion by 2035 — an increase of $24 trillion.

Debt held by whom?

However, the federal debt includes money the government owes to itself, such as money the Treasury must pay into Social Security trust funds. When this “intragovernmental debt” is removed, the remaining “debt held by the public” — or money the government owes to other entities — totaled $26.2 trillion in 2024. 

The CBO expects debt held by the public to reach $49.6 trillion in 2035, an increase of $23.4 trillion. 

If the CBO is correct, debt held by the public will increase at a faster rate than the overall federal debt. That’s bad news for taxpayers, who are responsible for the entire debt held by the public. 

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Summary: It won’t be long before deficit spending is no longer just an abstract number and begins having drastic consequences on our economy.

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This article was originally published by RCI and made available via RealClearWire.