Rising U.S. Deficits: A Forecast in Fiscal Caution

The Congressional Budget Office predicts a $1.865 trillion U.S. budget deficit for fiscal 2025. Potential extensions of current tax rates could increase deficits. Despite slight shifts linked to economic growth projections, deficits are poised to rise long-term, driven by tax policies and clean energy subsidies. CBO notes stable economic growth.

The U.S. budget deficit for fiscal 2025 is projected to be $1.865 trillion, according to the Congressional Budget Office (CBO). This forecast remains steady compared to last year's figures, indicating no immediate financial deterioration as President-elect Donald Trump prepares to assume office.

Efforts by Trump and congressional Republicans to maintain current individual and small business tax rates could worsen deficits by over $4 trillion over the next decade, unless counterbalanced by savings elsewhere. Additional tax exemptions, including Social Security and overtime income, could further contribute to the debt. The CBO report shows deficits will slightly decline to $1.687 trillion in fiscal 2027 but are expected to escalate, reaching $2.637 trillion by 2033.

The CBO attributes a modest reduction in the near-term deficit to increased revenue expectations linked to upward revisions of the U.S. economy's size. While growth rates are projected to slow slightly, the CBO forecasts no significant drop in economic output. The forecast integrates higher cost estimates for clean energy tax subsidies under President Biden's Inflation Reduction Act, alongside an anticipated Federal Reserve intervention to mitigate consumer spending impacts.

(With inputs from agencies.)