Federal deficits projected to rise, surpassing $1 trillion in 2020

Donald Trump's tax cuts and spending increases are forecast to inflate the US deficit

Donald Trump's tax cuts and spending increases are forecast to inflate the US deficit Credit Reuters

The new CBO projection is the first since President Donald Trump signed a tax cut that is expected to cost the government almost $1.9 trillion over 11 years, then signed legislation to significantly boost military and domestic spending over the next two years.

The deficit is expected to grow to more than 5 percent of gross domestic product.

Why? Well, the CBO said in its report (https://www.cbo.gov/publication/53651), "Accounting for most of that difference is a $194 billion reduction in projected revenues, mainly because the 2017 tax act is expected to reduce collections of individual and corporate income taxes". That is to say, the Trump tax cuts were always meant to cost more than their $1.5 trillion list price. The AP points out the report estimates that the GOP tax bill will add $1.8 trillion to the deficit over the coming decade, even after the "positive benefits on the economy are factored in".

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"Anyone who argues this course can continue is living with blinders", said Campaign to Fix the Debt Co-chairmen Judd Gregg, a former GOP senator, and Ed Rendell, a former Democratic governor. Finally, the CBO also took into economic data from the end of 2017, which showed that the economy was growing at a faster pace than first thought.

The short-term boost also comes at a significant price: The government will run a deficit of $804 billion this year, which is much bigger than last year's $665 billion tally.

Net outlays for interest paid on federal debt are projected to roughly triple what they are this year in nominal terms and roughly double as a percentage of GDP, according to the CBO. It predicts that government debt held by the public will swell to almost 100% of United States gross domestic product at the end of the 2020s. Between 2009 and 2012, budget deficits exceeded $1.0 trillion as the government was dealing with the Great Recession. CBO's projections, especially its economic projections, are even more uncertain than usual this year, because they incorporate estimates of the economic effects of the recent changes in fiscal policy-and those estimates are themselves uncertain.

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House Republican leaders have scheduled a vote this week on a Constitutional amendment to require a balanced federal budget. The tax law is projected to add at least $1.5 trillion to the national debt over the next debate. Trump has ruled out cuts to social security or Medicare and Republicans on Capitol Hill have failed to take steps against the deficit since Trump took office.

"In our economic projections, which underlie our budget projections, inflation-adjusted GDP, or real GDP, expands by 3.3 percent this year and by 2.4 percent in 2019".

Interest Payments: Interest payments on the debt will reach $915 billion in 2028.

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"This high and rising debt matters because it harms our economy, by crowding out public and private investment, reducing our fiscal flexibility, and lowering confidence and certainty".

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