US Budget Deficit Headed To Over $1 Trillion By 2020
12 April, 2018, 00:41 | Author: Diane Mills
According to the Congressional Budget Office (CBO), the U.S. 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 Congressional Budget Office says tax and spending bills will push the deficit to $804 billion this year and almost $1 trillion for 2019. But House Republicans scheduled a vote later this week on adding a balanced budget amendment to the Constitution, which could force some fiscal restraint.
But note this is based on "current law", and assumes substantial income tax increases in 2025 as individual tax cuts expire, and that there will be spending cuts too. 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".
If lawmakers take the route of least resistance, the CBO estimates that in ten years, the debt - which reflects the accumulation of deficits over the years - could reach 105% as a share of the economy, higher than at any time except right after World War II.
"The growth of real GDP exceeds the growth of real potential GDP over the next two years".
The CBO said the tax cuts and the additional spending will boost consumer demand, supercharging the economy.
What's more, as CBO explains, its figures very likely underestimate the size of the deficit. "Those effects, as well as a larger federal budget deficit resulting from the new outliers, exert upward pressure on interest rates and prices". It also raised its deficit forecast for the current year by $242 billion, to $804 billion.
The agency said it now expects America's cumulative deficit over the next decade to grow to $11.7 trillion compared to a previous forecast of $10.1 trillion.
Senate Minority Leader Chuck Schumer, D-New York, blamed the new tax law.
The 2001 and 2003 Bush tax cuts, for instance, were extended during the Obama administration and then largely made permanent when Congress faced the so-called fiscal cliff in 2012.
A copy of the $1.3 trillion spending bill is stacked on a table in the Diplomatic Room of the White House in Washington, March 23, 2018.
The biggest drivers of the problem are interest payments on the debt and the entitlement programs that make up the social safety net. The government would borrow about 19 cents of every dollar it spend this year.
"No one can say they didn't see this coming". But the outlook could be even worse than we thought. "The American people deserve a Congress that is focused squarely on helping the middle class, not patronizing Kabuki theatre - like sham "balanced budget" votes - from Republicans who blew up the deficit to benefit wealthy special interests".
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