CBO Reports Foreign Aid And Student Loan Forgiveness Behind Surging Deficit

The Congressional Budget Office (CBO) announced Tuesday that the United States’ projected deficit for the 2024 fiscal year has surged to $1.9 trillion, a $400 billion increase from the February projection. This sharp rise is primarily due to recent legislative actions and policy decisions by the Biden administration.

Significant contributors to the increased deficit include a substantial foreign aid package and initiatives to forgive student loan debt. In April, President Joe Biden signed a $95 billion aid package targeting Ukraine, Israel, and countries in the Indo-Pacific region. The CBO incorporated this expenditure into its latest projections, substantially impacting the deficit forecast.

Additionally, the Biden administration’s efforts to reduce student loan balances have added $66 billion to the deficit. The CBO accounted for half of the estimated $132 billion cost of Biden’s student loan forgiveness proposal, anticipating the possibility that the rule may not be finalized. If the program is fully implemented, the CBO’s projection could increase by another $66 billion.

The CBO’s long-term outlook is also concerning, projecting that U.S. debt will reach $50.7 trillion by the end of 2034, up from $26.2 trillion at the end of 2023. This would amount to 122% of the nation’s GDP by 2034. Such a high debt-to-GDP ratio has sparked warnings from policymakers about the sustainability of the country’s fiscal policies.

Republican Georgia Rep. Mike Collins criticized the new deficit projections, calling them “mind-boggling and civilization-ending numbers” on social media. He stressed the urgent need for Congress to address the increasing annual deficits and mounting national debt.

Beyond foreign aid and student loan forgiveness, other factors contributing to the rising deficit include increased Medicaid costs and higher spending on FDIC insurance following recent turmoil in the banking sector. The cost of interest payments on federal debt is also expected to soar, with net interest outlays projected to rise from $892 billion in 2024 to $1.7 trillion by 2034. Additionally, the U.S. faces $93.1 trillion in unfunded liabilities for programs like Social Security.

In response to these alarming figures, the White House has defended its fiscal strategies. In March, President Biden asserted that his budget would reduce the deficit by $3 trillion over the next decade and highlighted a reduction of over $1 trillion in the deficit under his administration. He contrasted this with former President Donald Trump, accusing him of adding more to the national debt than any other president. However, a fact check by USA Today disputed Biden’s claim, noting that the national debt increased more in raw dollar terms under former President Barack Obama than under Trump.