The Congressional Budget Office said Tuesday that deals struck on Capitol Hill since the end of the summer will see the federal deficit in 2016 rise by $130 billion.
The current projected fiscal shortfall for this year is now expected to be $544 billion, up from $439 billion in 2015.
“That increase is largely attributable to legislation enacted since August—in particular, the retroactive extension of a number of provisions that reduce corporate and individual income taxes,” CBO said.
It noted that the deal, which lifted caps on spending set by the so-called sequestration limits—the Budget Control Act of 2011—will also see defense spending “edge up slightly” for the first time in five years.
CBO said that the legislation will see net outlays increase as a percentage of Gross Domestic Product for the first time since 2009, but that the resulting increase in debt won’t weigh heavily on the balance books in the short-run.
“[N]et interest spending is anticipated to equal only 1.4 percent of GDP in 2016, still well below its 50-year average of 2.0 percent,” the non-partisan body said.
It added, however, that rising interest rates caused debt servicing costs to increase last year.
The trend could continue over the next twelve months, if the Federal Reserve decides to hike rates again, as it did in late 2015.
