The Congressional Budget Office on Friday forecast a $1.865 trillion U.S. budget deficit for fiscal 2025, largely flat with last year and indicating no major deterioration in government finances before President-elect Donald Trump takes office on Monday.
The CBO "baseline" estimates are based on current laws and assume that Trump's 2017 individual tax cuts expire as scheduled at the end of this year, causing rates to snap back to higher levels.
Efforts by Trump and Republicans in Congress to extend current individual and small business tax rates could add over $4 trillion to deficits over 10 years if not offset with savings elsewhere. Other tax breaks promised by Trump, such as exempting Social Security, tip and overtime income from taxation, could add more debt.
The CBO data shows that deficits decline slightly to $1.687 trillion, or 5.2% of GDP in fiscal 2027 before gradually rising to $2.637 trillion, or 6.5% of GDP in 2033. The 2026-2035 cumulative deficit is estimated at $21.758 trillion, or 5.8% of GDP.
The CBO's fiscal 2025 deficit, which equates to 6.2% of GDP, is about $73 billion lower than the non-partisan budget referee agency's previous forecast for that year in June 2024.
"The largest contributor to the cumulative decrease was growth in projected collections of individual income taxes, driven by greater projections of taxable income in CBO’s economic forecast," CBO said in the report.
The CBO forecasts a slightly slower U.S. economic growth rate, at 1.9% for 2025, compared to 2.0% in the June forecasts, with growth averaging 1.9% over the 2024-2034 window.
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