Federal Deficit Set to Grow in 2016

The budget deficit this year will grow as a percentage of GDP for the first time since 2009, rising to $544 billion and 2.9 percent of GDP, according to the Congressional Budget Office’s annual budget and economic outlook report released today. The deficit will be $130 billion higher than the CBO projected last year due to congressional action in late 2015 to make several annually renewed tax provisions permanent.

The CBO projected outlays to rise by 6 percent this year to $3.9 trillion, while revenues grow by 4 percent to $3.4 trillion. With interest rates beginning to rise, the CBO said the cost of net interest on U.S. debt would grow by 14 percent this year while remaining below its long-run level as a share of GDP.

Over the next decade — through 2025 — the CBO projected cumulative deficits of $8.5 trillion, with both revenues and outlays projected to hold steady as a percentage of GDP absent major policy shifts.