CBO: 2018 budget deficit to reach $804B

12 April, 2018, 00:56 | Author: Kristi Owen
  • Donald Trump speaks during a campaign event in Hartford Conn. in April 2016

According to the Congressional Budget Office (CBO), the USA will return to trillion-dollar annual budget deficits from 2020 onwards as the tax cuts pushed by Trump and Republicans, and higher public spending, strain America's finances.

The CBO report projects that the federal budget deficit will reach $1 trillion by 2020, two years earlier than previously expected, and that federal debt will rise to almost 100% of Gross Domestic Product (GDP) by 2028, which would be the highest debt level since just after World War II.

Over the 2018-2027 period, CBO estimates the cumulative deficit would be $1.6 trillion larger than the June projection - $11.7 trillion rather than $10.1 trillion.

The CBO's annual report on the economy and USA budget typically releases in January but was delayed so it can assess effects of the spending bill and tax overhaul.

CBO projected that real GDP will rise to 3.3 percent in 2018, before dropping below 2017 levels to 2.4 percent next year.

"The CBO's latest report exposes the scam behind the rosy rhetoric from Republicans that their tax bill would pay for itself", said top Senate Democrat Chuck Schumer of NY. As deficits accumulate, debt held by the public rises from 78 percent of GDP, or $16 trillion at the end of 2018 to 96 percent of GDP, or $29 trillion by 2018.


He want on decry a planned Balanced Budget Amendment vote in the House this week as a "sham". Expirations for individual tax rates at the end of 2025 will slow economic growth as well. But such a measure has little chance of passing and the effort will largely be about political messaging.

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

"The largest effects on GDP over the decade stem from the tax act", according to the CBO. But now the Federal Reserve is raising rates, meaning the government's borrowing costs are projected to increase.

There is a nightmare scenario in which borrowers lose faith in the country's ability to pay back its debts, demanding higher interest rates on their loans and setting off a spiral of larger deficits and still-higher rates.

The tsunami of red ink barreling toward the nation's fiscal house is coming in higher and faster than expected, a tide menacing the economic expansion that could force a reckoning among policymakers who have only made the problem worse. "The bigger the debt, the bigger the chances of a fiscal crisis", Hall said. Bernie Sanders, I-Vermont. "It's just conjecture".

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

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