Congressional Budget Office: Deficit Will Shrink, Then Surge

The Congressional Budget Office released an economic outlook Wednesday saying that high inflation will persist into next year, likely causing the federal government to pay higher interest rates on its debt. The nonpartisan agency expects that the consumer price index will rise 6.1% this year and 3.1% in 2023, reports the AP. This forecast suggests that inflation will slow from current annual levels of 8.3%, yet it would still be dramatically above a long-term baseline of 2.3%. CNBC reports the forecast has inflation getting to that 2% level in 2024.

The 10-year estimates do contain positive news as this year's annual budget deficit will be $118 billion lower than forecast last year, shrinking to $1 trillion. That's a big drop from last year's $2.8 trillion deficit, and a byproduct of the end of pandemic-related spending and the solid job growth it helped to spur. As a share of the total economy, publicly held debt will drop through 2023 but will then begin to climb, hitting 6.1% of GDP in 2032, reports CNN. The CBO pointed out the deficit has been greater than that only six times since 1946.