If you’ve looked at some of the federal budget numbers recently, it’s easy to see why President Donald Trump and some members of Congress are increasingly concerned about cutting costs while some are also looking to raise more revenues.
Recently, the House narrowly passed the Senate-amended budget resolution. That unlocks the budget reconciliation process that will be used to try to enact Trump’s legislative priorities, including updating and renewing provisions of the Tax Cuts and Jobs Act. But there are battles ahead on a range of details.
Rep. Frank Lucas, R-OK, says the budget battle ahead will be the “wildest political rodeo voters have ever seen.”
Here’s a closer look at why Lucas is so concerned about the federal debt and deficit.
The Congressional Budget Office looks at deficits on a regular basis and in March, the federal budget deficit totaled $1.3 trillion for the first half of fiscal year 2025. That’s $245 billion more than the deficit recorded during the same period last fiscal year. Even though revenues increased by $71 billion, federal outlays rose by $317 billion.
Longer term, CBO projected what the federal budget and the economy would look like over the next 30 years if current laws generally remained unchanged. This projection assumes that the Tax Cuts and Jobs Act, enacted in 2017, will be allowed to expire.
The projections do not reflect the effects of administrative actions taken or judicial decisions made after those respective dates, including actions and decisions affecting immigration, tariffs, and other policy areas, the agency notes. Obviously, things will change, but here’s a snapshot of what CBO reported in their long-term outlook from 2025-2055:
- Debt
Federal debt held by the public, measured as a percentage of gross domestic product, increases in every year of the 2025–2055 period. By 2029, that debt climbs to 107% of GDP. That’s higher than the historical peak it reached immediately after World War II. In 2055, it reaches 156% of GDP and remains on track to increase thereafter. “Such large and growing debt would slow economic growth, push up interest payments to foreign holders of U.S. debt, and pose significant risks to the fiscal and economic outlook; it could also cause lawmakers to feel constrained in their policy choices,” CBO noted.
- Deficits
The total federal budget deficit remains large by historical standards over the next 30 years, averaging 6.3% of GDP—more than one and a half times its average over the past 50 years—and reaching 7.3% of GDP in 2055.
- Outlays and revenues
Federal outlays rise over the next 30 years, reaching 26.6% of GDP in 2055. CBO says outlays have exceeded that level only twice: during World War II and during the coronavirus pandemic. Growth in net interest costs; spending for federal health care programs, particularly Medicare; and spending for Social Security, especially over the next decade, drive that increase. However, measured as a percentage of GDP, revenues increase over the next few years, largely because of the scheduled expiration of certain provisions of the 2017 tax act.
Where does Congress go from here?
The recently passed budget resolution contains vastly different instructions to House and Senate committees when it comes to spending cuts. The House committee instructions require a total of $1.5 trillion in cuts, while the Senate instructions only detail $4 billion. There’s a lot of uncertainty over what that number will ultimately look like, but ultimately, both bodies will need to agree to proceed with budget reconciliation.
Rep. Don Bacon, a Nebraska Republican on the House Agriculture Committee, said he still expected the cuts to ultimately total less than $1.5 trillion.
“I don’t think it’s going to be [$1.5 trillion] when it’s all said and done,” Bacon said.
But members of the Freedom Caucus and House Budget Committee Republicans said they are still committed to making the 2017 tax cuts permanent and that it will be essential to reach the $1.5 trillion in cuts to pay for this. Members also said they assume a level of economic growth tied to the tax cuts that will help offset the full cost of the extension.
The House Ag Committee is required to find $230 billion over 10 years, while the Senate Ag Committee can cut as little as $1 billion. The cuts could come from projected spending for the Supplemental Nutrition Assistance Program.
Rep. Chip Roy, R-TX, said the House Freedom Caucus received “strong confirmations” about the level of cuts and how to achieve those through reforms to the Inflation Reduction Act and Medicaid. Additionally, he said the House leadership committed to maintaining the House bill framework and guaranteeing connectivity between spending and taxes.
“We have now three strong statements from the speaker, the president and the Senate majority leader,” Roy said. “We did not have those 48 hours ago. We do now. Now that is a step, which is just the beginning.”
At a joint appearance with House Speaker Mike Johnson, R-LA, ahead of the recent House vote, Senate Majority Leader John Thune, R-SD, briefly addressed the $1.5 trillion target.
“Our ambition in the Senate is we are aligned with the House in terms of what their budget resolution outlined in terms of savings. The speaker has talked about $1.5 trillion,” Thune said.
“We have a lot of United States senators who believe that is a minimum, and we’re certainly going to do everything we can to be as aggressive as possible to see that we are serious about the matter, not only of making our federal government more fiscally responsible but also deficit reduction, which is critical to a lot of members in the Senate and I know to his members in the House,” Thune said.
Editor’s note: Sara Wyant is publisher of Agri-Pulse Communications, Inc., www.Agri-Pulse.com.
