CBO forecasts the return of trillion-dollar deficits

12 April, 2018, 00:52 | Author: Rosalie Gross
  • Donald Trump's tax cuts and spending increases are forecast to inflate the US deficit

Jeff Stein, The Washington Post •.

The report projects economic growth to slow after 2019, with projected deficits increasing "markedly" since the CBO's last report in June 2017.

Federal watchdog the Congressional Budget Office forecast the deficit to swell to $804bn this year, some $242bn more than it projected last summer.

CBO director Keith Hall warns that rising debt raises the chance of a fiscal crisis in the years ahead.

With the passage of deep tax cuts late previous year, annual United States budget deficits are expected to balloon over the next decade, the nonpartisan Congressional Budget Office said on Monday.

This year, lawmakers approved a two-year budget deal that raised strict caps on military and domestic spending by about $300 billion.

The report said the debt burden would approach 100 percent of the GDP by 2028, the highest level since just after World War II. The CBO expects real GDP to grow 1.8 percent in 2020, continuing at an average annual rate of 1.7 percent from 2020-2026. Notably, and in keeping with the anti-intellectual spirit of the times, conservatives have not even bothered formulating a rationale for increasing the deficit during the peak of an economic expansion.

While most economists agree that the measures of $1.5trn tax cuts and high federal infrastructure spending will produce jobs in the short term, the long term impact could spell problems.

The deficits are expected to drive the national debt from $21 trillion now up to $33 trillion within 10 years.

"We've had a big tax cut and a big spending increase, and they're showing up here", said Benjamin Page, a senior fellow at the Tax Policy Center, a nonpartisan think tank.

Senate Minority Leader Chuck Schumer, D-New York, blamed the new tax law.

According to the report, the tax law would cost the government $2.3 trillion in revenues, but economic growth would offset that figure by about $461 billion.

The economic growth promises to drop the nationwide unemployment rate below 4 percent, CBO predicts. "The economy is improving, with the help of tax reform, but we now must get serious about spending reform and cuts". But in an indicator that Republicans are becoming concerned about the political liability of surging shortages, " the House will vote Thursday to a constitutional amendment to require balanced funding.

Ultimately, neither party appears to have a deficit-reduction proposal that could get enough support from the other to pass.

"Anyone who argues this course can continue is living with blinders", said Campaign to Fix the Debt Co-chairmen Judd Gregg, a former GOP senator, and Ed Rendell, a former Democratic governor.

The government has been able to finance its debt relatively cheaply because of a decade of historically low interest rates since the recession.

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