CBO Projects $1.5 Trillion Deficits - and That's Being Optimistic

CBO Projects $1.5 Trillion Deficits - and That's Being Optimistic

CBO Projects $1.5 Trillion Deficits - and That's Being Optimistic

The CBO's annual report on the US budget and economy typically comes out in January but was delayed this year to allow it to assess effects of the tax overhaul and spending bill.

The Congressional Budget Office said its projected increase in the 2018 budget deficit is due to new tax cuts and the March spending bill.

"Today's CBO report underscores the reality that the Republicans' $1.5 trillion tax plan will increase our already large national debt", wrote Democratic Senator Chris Van Hollen in a statement. "Deficits as far as the eye can see" used to be considered a problem, but we have now reached a remarkable new milestone of fiscal irresponsibility: trillion-dollar deficits as far as the eye can see.

"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. But the CBO expects growth to slow to 2.4 percent in 2019. Total deficits over the next decade would total almost $12.42 trillion. CBO attributes these economic trends to the three major laws mentioned above, along with rising federal budget deficits over the ten-year window. Market Watch notes that the US hasn't run deficits exceeding a trillion dollars since 2012. 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 2028.

Senate Democratic Leader Chuck Schumer said the lower revenues and higher deficits resulting from the tax overhaul will prompt Republicans to call for cuts to social safety net programs such as the Social Security retirement program and the Medicare health insurance program for the elderly. 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.

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That budget gap - the amount by which the US government spending exceeds revenue - is then forecast to remain above $1 trillion through 2027.

Republicans claimed their economic policies would pay for themselves by stimulating growth. But for shifts in timing of payments, the deficit would have been even worse, at $848 billion, which would have been a one-year surge of 28 percent.

Because the CBO can only make projections based on current law, its outlook will include the phase-out of some tax cuts in the middle of the next decade. Tax collection averaged 18 percent of GDP over the 2018-2027 period in last year's estimate.

Spending will exceed revenue by $804 billion in the fiscal year through September, jumping from a projected $563 billion shortfall forecast in June, the non-partisan arm of Congress said in a report Monday.

The House vote is aimed more at the politics of a midterm election in which lawmakers can cast a vote that says they care about deficits, even as Congress has done the opposite.

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