Published: Thu, April 12, 2018
Research | By Dana Schwartz

Deficit to top $1 trillion per year by 2020, CBO says

Deficit to top $1 trillion per year by 2020, CBO says

The U.S. budget deficit will balloon over the next few years mainly because of deep tax cuts approved in December by Republicans in the U.S. Congress and President Donald Trump, the nonpartisan Congressional Budget Office said on Monday.

The CBO report says that that the twin tax and spending bills will push the budget deficit to $804 billion this year and just under $1 trillion for the upcoming budget year. Real GDP will expand 3.3 percent in 2018 and 2.4 percent in 2019.

Despite stronger-than-predicted economic growth ahead, the CBO said the deficit will grow to $804 billion in fiscal 2018, which ends on September 30, up from $665 billion in fiscal 2017.

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"Such high and rising debt would have serious negative consequences for the budget and the nation", said CBO Director Keith Hall. "It also reflects significant growth in interest costs, which are projected to grow more quickly than any other major component of the budget [as] the result of rising interest rates and mounting debt". 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.

The CBO reported that from 2021 to 2028, deficits will average 4.9 percent of the total American economy - higher than at any point since World War II other than during the recession in 2008 and 2009.

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Senate Democratic Leader Chuck Schumer said the lower revenues and higher deficits resulting from the tax overhaul will prompt Republicans to call for cuts to social safety net programs such as the Social Security retirement program and the Medicare health insurance program for the elderly.

The timing of the balanced-budget debate - after Congress agreed to cut taxes and spend more money that will substantially grow the deficit and debt - has longtime budget hawks once again scolding lawmakers for rhetoric that does not meet reality.

If the Republicans really wanted to lock in their tax cuts, they needed spending restraint.

In fact America could be staring at a decade where the size of its debt and budget deficit starts growing faster than the economy, and if the economy slows, then the situation will worsen dramatically.

Worse, it could ultimately lead to an economic downturn and make a fiscal crisis more likely.

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