The revisions represent essentially no shift in the CBO's view that despite some near-term relief, the federal deficits are unsustainable and could lead to another financial crisis in the long run. It attributes much of the increase in deficits and debt through 2039 to the costs of caring for an aging population, especially the so-called Baby Boom generation.
By 2039, spending on healthcare programs would rise sharply, to 14 percent of gross domestic product, up from a seven percent average over the past 40 years, CBO said. As the federal debt load increases, net interest payments would balloon to 4.7 percent of GDP in 2039 from about 1.3 percent currently.
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That will crowd out spending on defense and discretionary programs, reducing them to 7 percent of GDP by 2039—the smallest share of the economy since the late 1930s.
The slight increase of public debt to 106 percent of GDP in 2039 from the 102 percent level projected last year reflects mainly a downward revision in long-term economic growth that the CBO initially made in February that assumes lower participation in the labor force.
"Economic growth will be slower in the future than it has been in the past, CBO projects, largely because of a slowdown in the growth of the labor force resulting from the retirement of the Baby Boom generation, declining birth rates and the leveling-off of increases in women's participation in the labor market," CBO said.