On Wednesday, February 7, the Congressional Budget Office (CBO) released its annual long-term budget outlook, painting a sobering picture of the country’s long-term fiscal outlook, which includes the highest federal debt level ever recorded in American history.
The long-term budget outlook paints a sobering picture of the country’s long-term fiscal outlook. For example, the federal debt is projected to increase from 99 percent of the country’s gross domestic product (GDP) in 2024, to 116 percent of GDP in 2034—the highest debt level ever recorded in American history.
The latest CBO forecast also makes significant revisions to previous projections about revenues collected from the gas tax. Over the past year, the Environmental Protection Agency (EPA) proposed much more stringent vehicle emissions standards that would begin with the 2027 model year, and the Treasury Department significantly relaxed some requirements on businesses and individuals claiming the “clean vehicle” tax credits. CBO now projects that the annual revenue deposited into the Highway Trust Fund (HTF) will peak in 2027 at $42 billion, and then begin to fall. The HTF is projected to deplete entirely sometime in 2028, and then run an annual deficit of over $80 billion annually. Cumulatively, CBO projects the HTF “shortfall” between 2028 and 2034 will be $279 billion. Worse, the effect of the EPA’s vehicle emissions standards on the trust fund are likely to be more significant than currently projected once the rule is finalized, due to restrictions in law on how CBO performs its calculations.
AGC strongly supported the bipartisan Infrastructure Investment and Jobs Act (IIJA), which deposited $118 billion into the HTF. IIJA’s authorization expires in 2026, but, as CBO projects, will need significant additional revenue to sustain the level of spending authorized by the legislation. AGC continues to call on Congress to find new revenue sources for the HTF, such as a VMT fee, higher taxes on gasoline and diesel, and other methods.
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