In the Congressional Budget Office’s current baseline projections, the deficit reaches $2.9 trillion, or 7.3 percent of gross domestic product (GDP), in 2033. In response to your request, this letter provides information about the two budgetary paths you specified, which would eliminate that deficit through reductions in spending. Those paths are illustrative, and the analysis presented here does not represent a cost estimate for legislation.
CBO’s calculations show the following:
The budget would be balanced in 2033 if all noninterest outlays were gradually reduced starting in 2024 so that they were 29 percent less than the amount in the agency’s baseline projections in 2033. Under that path, revenues equal the baseline amounts, which reflect the scheduled expiration of certain provisions of the 2017 tax act.
If those tax provisions were extended, revenues would be lower than they are in CBO’s baseline projections, and larger reductions in spending would be needed to balance the budget. In that case, the budget would be balanced in 2033 if noninterest spending was gradually reduced from 2024 to 2033 so that in that final year it was 35 percent less than the amount in CBO’s baseline projections adjusted to incorporate the extension of the tax provisions.
If some categories of noninterest spending were not subject to those reductions, the cuts in other types of spending would have to be larger.