WASHINGTON, June 18 (Reuters) - The U.S. budget deficit

will jump to $1.915 trillion for fiscal 2024, topping last

year's $1.695 trillion gap as the largest outside the COVID-19

era, the Congressional Budget Office said on Tuesday, citing

increased spending for a 27% increase over its previous

forecast.

The CBO said in an update to its budget outlook that higher

outlays for student loan relief, Medicaid healthcare for the

poor, higher Federal Deposit Insurance Corp costs to resolve

bank failures and U.S. aid to Ukraine and Israel make up the

bulk of a $408 billion increase in this year's projected deficit

since February, when it forecast a $1.507 trillion deficit.

If realized, the forecast for the fiscal year ended

Sept. 30 would mean a second consecutive substantial deficit

increase for U.S. President Joe Biden after deficits fell

substantially in 2022 as COVID spending subsided.

CBO forecast that the deficit would climb further in fiscal

2025 to $1.938 trillion.

Asked later about the budget setback, White House

spokesperson Karine Jean-Pierre said she had not seen the CBO

update, but added that Biden was working "to do everything that

he can to do the right thing when it comes to lowering the

deficit."

$2 TRILLION JUMP

For the fiscal 2025-2034 decade, the CBO raised its

cumulative deficit forecast to $22.083 billion, up $2.067

trillion from the February projection.

It said debt held by the public at the end of 2034 would

total $50.7 trillion, or 122% of gross domestic product,

compared to the February forecast of 48.3 trillion, or 116% of

GDP.

Factors pushing up the long-term deficits included $1.6

trillion in increased outlays related to recent legislative

changes, including extensions of the supplemental funding of $95

billion passed this year for Ukraine, Israel and the

Indo-Pacific region, CBO said.

A strengthened economic outlook reduced the long-term

deficits by $600 billion over 10 years in the latest forecast,

but this was also offset by a $1.1 trillion deficit increase due

to technical revisions, including upward revisions to outlays

for debt interest and healthcare costs. CBO now expects net

interest costs to reach $1.7 trillion in fiscal 2034, up from

$658 billion in 2023.

Michael Peterson, CEO of the Peter G. Peterson

Foundation, which advocates for deficit reduction, said report

shows that the U.S. debt challenge was getting worse.

"The harmful effects of higher interest rates fueling

higher interest costs on a huge existing debt load are

continuing, and leading to additional borrowing," Peterson said

in a statement. "It's the definition of unsustainable."

The estimates are based on current tax and spending laws and

assume that individual tax cuts passed by Republicans in 2017

will expire on schedule at the end of 2025. Tax experts estimate

that making all of these cuts permanent, which Republican

presidential candidate Donald Trump has proposed, would add

another $4 trillion to the 10-year deficit.

The CBO, Congress' non-partisan budget referee agency, also

updated its U.S. economic projections, increasing its calendar

2024 forecast for real gross domestic product growth to 2.0%

from 1.5% in February, amid stronger-than-projected activity,

job growth and inflation.

The CBO projects a lower unemployment rate for 2024 at 3.9%

compared to 4.2% in February and includes no Federal Reserve

interest rate cuts this year.

It said a significant source of the economic improvement was

due to a surge in immigration in recent years, leading to an

increase of 8.7 million U.S. residents from 2021 to 2026 over

historical levels. Should the trend continue, it said the surge

would increase GDP by a total of $8.9 trillion, or 2.4% over the

next decade.