CBO report projects massive deficits during Trump administration

12 April, 2018, 00:40 | Author: Jason Torres
  • Trump tax cuts forecast to send US deficit to $1 trillion in 2020

The nonpartisan Congressional Budget Office now projects that annual USA budget deficits will cross the trillion-dollar mark in 2020, two years sooner than what the agency was projecting just 10 months ago.

In the next few years, deficits will "grow substantially" before stabilizing in 2023, resulting in a projected cumulative deficit of $11.7 trillion for 2018-2027, the CBO said.

There were $1 trillion deficit spending years most recently under President Barack Obama, primarily due to the economic downturn during the Great Recession, but deficit spending had been decreasing in recent years.

Altogether, deficits over the decade will be $1.6 trillion higher than previously projected by CBO and by 2028, debt held by the public would total almost 100 percent of GDP; the most since post-World War II. The twin tax and spending bills will push the budget deficit to $804 billion this year, ending September 30, 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. Debt held by the public will stand at a staggering $29 trillion by 2028, the analysis said, prompting a warning from CBO Director Keith Hall.

The CBO notes in its report that, if the tax cuts for lower income people are renewed by Democrats in the mid 2020's then the fiscal outlook will be much darker. More speculatively, higher wages and less competition in the labor force could actually raise the fertility rate among Americans, ultimately contributing to a larger labor force than the CBO now expects.

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More worrying for politicians the CBO projections and CBO also assumes significant tax increases toward the end of the 2020's because the Trump tax cuts were created to give permanent cuts to corporations and heirs of large estates, but linked these to temporary, expiring tax cuts for the middle class.Trump and the Republicans were forced to do this because the $US1.5 trillion budget limit did not allow them enough money to cut all the taxes they wanted to cut.

"To address our federal debt, we must slow the growth of entitlement spending, increase revenues with a growing economy, and make responsible spending cuts", Lankford said in a statement.

The deficit will be $1 trillion by 2020 and $1.3 trillion a year by 2025.

House Republicans have said they will take up a measure to balance the budget, now that lawmakers have returned from a two-week recess. The law also lowers the corporate tax rate by 14 percentage points with the aim of attracting more business investment, increasing productivity and thereby boosting economic growth. It is hard to imagine any cuts to Social Security, Medicare or other public programs, even though they make up a good portion of the budget - That would be a "political non-starter". On Monday the Congressional Budget Office said the bill was partially responsible for a large increase in the deficit.

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