Danny Moloshok | Reuters
WASHINGTON — The U.S. budget deficit will grow by an estimated $1 trillion over the next 10 years, the nonpartisan Congressional Budget Office projected in a new report Wednesday.
Part of that growth will be driven by unexpectedly high costs related to President Joe Biden’s signature policy goal: Reorienting the U.S. economy towards greener energy, the CBO found.
“I came to office determined to … face the existential threat of climate and still grow, to fundamentally change our economy, and to transition this country to a clean energy future,” Biden said last October.
The CBO projections offer a new window into how much Biden’s green energy agenda is going to cost the federal government to fully implement over the next decade.
Taken together, CBO estimates that the impact of new emissions standards, clean energy tax credits and falling gas tax revenue as people buy less gas, will add $25 billion to the budget deficit this year. Over a decade, CBO projects they will add $428 billion to the cumulative deficit.
More than half of that, $224 billion, is from “projections of amounts claimed for clean vehicle tax credits and of [lower] revenues from excise taxes on gasoline.”
“The costs of energy-related tax provisions are much higher than … originally projected,” said CBO director Philip Swagel at a press event Wednesday. “Those costs reflect new emissions standards, market developments, and actions taken by the administration to implement the tax provisions.”
Hours before the CBO report was released, the Environmental Protection Agency announced just such an action: A proposal for new emissions standards that would lower the maximum allowable levels of fine particles, or soot.
Business groups quickly came out against EPA’s proposed change to the standard.
The CBO also noted that there are still many unknowns about how green energy will impact the economy and the federal budget longer term. As a result “the budgetary effects of energy-related tax provisions remain highly uncertain.”
US President Joe Biden delivers remarks about the latest jobs report in the South Court Auditorium in the Eisenhower Executive Office Building on February 03, 2023 in Washington, DC.
Chip Somodevilla | Getty Images
There are still growing questions about whether U.S. manufacturers can train enough workers to build all the electric vehicles, low-emissions cars and charging infrastructure needed to make Biden’s vision into reality even 18 months after the passage of the Inflation Reduction Act.
In the meantime, the federal government deficit is increasing year by year.
Over the next decade, CBO estimated that approximately three-quarters of the $1 trillion growth in the federal deficit will be driven by the cost of paying interest on the national debt.
Also boosting deficits are two underlying trends: the aging of the population and growth in federal health care costs per beneficiary,” said Swagel.
The $1 trillion estimated deficit growth over the next 10 years was slightly lower than what the CBO projected last year, by around 7 percent. Much of that decrease came from a slowdown in the projected growth of government spending, which was mandated by the Fiscal Responsibility Act of 2023. That bill raised the U.S. debt limit and imposed long-term spending caps.
The lion’s share of projected savings from the spending caps will be used to fund growing costs elsewhere, the CBO said, such as for the green energy plan.
“To fight climate change, it’s the largest investment of its kind anywhere in the world — the single-largest investment ever,” Biden said of the plan.