Congressional Budget Office Updates Baseline: Deficit Totals to Third Highest in American History

WASHINGTON, D.C. – Last week, the Congressional Budget Office (CBO) released its updated budget projections for fiscal years (FY) 2025-2035. CBO’s report helps Congress understand the fiscal and economic challenges facing the country.

Topline Takeaways from CBO's Updated Baseline:

1. CBO now projects that deficit spending for FY25 will reach a staggering $1.9 trillion, the third-highest figure in American history.
   
   
2. The FY 2025 deficit amounts to 6.2 percent of GDP (the 50-year average is 3.8 percent). This historically high projection is the product of a 17.1 percent of GDP revenue projection (roughly equal to the 50-year average of 17.3 percent) and a higher level of spending, 23.3 percent of GDP compared to the 50-year average of 21.1 percent.
   
   
3. Annual interest spending has increased by $600 billion or 170 percent in the four years since President Biden took office.
   
   
   1. Interest costs are projected to increase steadily, from 9 percent of federal revenue in 2021 to 18 percent of federal revenue in 2025, to 22 percent of federal revenue in 2035.
      
      
4. Our country has a spending problem. Revenues are not the problem:
   
   
   1. Revenues are projected to total $67.5 trillion over ten years, and grow from $5.2 trillion (17.1 percent of GDP) in 2025 to $8.0 trillion (18.3 percent of GDP) in 2035.
      
      
   2. Revenue averages 18.1 percent of GDP over the decade, above the 50-year average of 17.3 percent of GDP. CBO increased their projection of revenues by $1.9 trillion over 10 years compared to last June.
      
      
5. By 2035, gross federal debt is projected to be $59.2 trillion (134.8 percent of GDP) in 2035, up from $36.2 trillion (123.2 percent of GDP) now.
   
   
6. Ten-year deficits are projected to be $21.8 trillion. The deficit increases by 36 percent over the budget window, growing from $1.9 trillion this year to $2.5 trillion (5.8 percent of GDP) in 2035.
   
   
7. Spending is expected to total $89.3 trillion over ten years. It will grow from $7 trillion (23.3 percent of GDP) in 2025 to $10.6 trillion (24.0 percent of GDP) in 2035. CBO projects mandatory spending (including interest) will continue to comprise by far the largest share of the budget. It will increase from 74 percent in 2025 to 78 percent of the budget in 2035.
   
   
   1. Mandatory Spending: $54.4 trillion over ten years, grows from $4.2 trillion (14.0 percent of GDP) in 2025 to $6.5 trillion (14.7 percent of GDP) in 2035.
      
      
   2. Net Interest Spending: $13.8 trillion over ten years, grows from $952 billion (3.2 percent of GDP) in 2025 to $1.8 trillion (4.1 percent of GDP) in 2035.
      
      
   3. Discretionary Spending: $21.1 trillion over ten years, grows from $1.8 trillion (6.1 percent of GDP) in 2025 to $2.3 trillion (5.3 percent of GDP) in 2035. 
      
      
8. Revenue totals $67.5 trillion over ten years, and grows from $5.2 trillion (17.1 percent of GDP) in 2025 to $8.0 trillion (18.3 percent of GDP) in 2035. Revenue averages 18.1 percent of GDP over the decade, above the 50-year average of 17.3 percent of GDP.
   
   
9. Economic Growth is expected to be 2.1 percent in 2025 and averages only 1.8 percent annually over the next decade.
   
   
10. CPI inflation measures at 2.2 percent in 2025, with a 2.3 percent average over the next decade.
    
    
11. The projected interest rate on 10-year Treasury notes for 2025 has increased from 2.1 percent when President Biden took office to 4.1 percent in CBO’s latest projection. The 10-year average interest rate projection is 3.9 percent.

Read an executive summary of CBO’s updated budget projections for fiscal years (FY) 2025-2035 HERE.

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