U.S. deficit to surpass $1 trillion two years ahead of estimates
12 April, 2018, 00:51 | Author: Tara Reeves
Jeff Stein, The Washington Post •. The Republican tax legislation, passed by Congress without Democratic support, along with a recent bipartisan $1.3 trillion spending package, are expected to drive economic growth faster than initially expected, CBO said.
Projected deficits over the 2018-2027 period have increased markedly since June 2017, when CBO issued its previous projections.
CBO said the projected debt increase, approaching 100 percent of the Gross Domestic Product in 2028, "is far greater than the debt in any year since just after World War II". The rush has been to blame this news on the GOP's tax cuts, .
The deficit will rise to $804 billion this year before jumping to $1 trillion in 2019.
During debate on the bill, Republican leaders predicted that their proposal would spark massive economic growth that would limit - or even eliminate - additions to the deficit. GDP growth is forecast to slow down after 2020, in part because all of this economic stimulus is likely to drive up interest rates.
Members of both parties further added to the deficit in March when they increased military and domestic spending by almost $300 billion over the next two years.
CBO notes in its report that, if realistic assumptions are made about both these categories, then the fiscal picture would grow even worse: The deficit would consume 6.3 percent of the economy from 2023 to 2028, and rise to 7.1 percent of GDP by 2028.
That budget gap - the amount by which the US government spending exceeds revenue - is then forecast to remain above $1 trillion through 2027.
Senate Democrat, Chuck Schumer stated that higher deficits and lower revenues due to the tax overhaul will force Republicans to cut programs such as Medicare health insurance and Social Security for elderly individuals. The total over the 10-year span beginning in 2017 was projected to be $9.4 trillion.
"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. "We have clear evidence that the McConnell-Ryan tax law is blowing a hole in our federal budget and contributing to higher costs for families accessing health through the marketplace". Others argued the CBO has it wrong, including Tax Analysts chief economist Martin Sullivan, who tweeted that the agency is "simply incorrect". "The economy is improving, with the help of tax reform, but we now must get serious about spending reform and cuts".
He want on decry a planned Balanced Budget Amendment vote in the House this week as a "sham". But such a measure has little chance of passing and the effort will largely be about political messaging.
"Most of this growth is driven by consumer spending and business investment, but federal spending also contributes a significant amount this year", Hall said. And if interest rates go up, the government would have to pay much more to finance the more than $14 trillion in Treasury debt held by investors.
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