CBO forecasts the return of trillion-dollar deficits

The CBO said that the long-term U.S. debt now more than US$ 21 trillion could soar to more than US$ 33 trillion by 2028

The CBO said that the long-term U.S. debt now more than US$ 21 trillion could soar to more than US$ 33 trillion by 2028

America's deficit is set to grow to over $1 trillion by 2020 - two years earlier than previously thought - according to a new report from the Congressional Budget Office.

The report comes as a hit to Republicans campaigning on tax cuts in the 2018 midterm elections, and a boon to Democrats looking to point out the hypocrisy of Republicans who once complained about President Barack Obama's spending and claimed to be deficit hawks.

Projected deficits over the 2018-2027 period have increased markedly since June 2017, when CBO issued its previous projections.

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. It forecasts a deficit exceeding $1 trillion a year starting in 2020.

Unless Congress acts to stem the tide of red ink, the deficit would climb to $1.5 trillion by 2028 - and it could reach $2 trillion by that year if lawmakers extend a number of temporary policies. That is to say, the Trump tax cuts were always meant to cost more than their $1.5 trillion list price.

The CBO also said the projections, especially the economic forecast, are even more uncertain than usual "because they incorporate estimates of the economic effects of the recent changes in fiscal policy - and those estimates are themselves uncertain". The rush has been to blame this news on the GOP's tax cuts, .

The increasing deficits could over time make it more difficult for the U.S. government to fund growth of domestic and defense programs
The increasing deficits could over time make it more difficult for the U.S. government to fund growth of domestic and defense programs

Instead the non-partisan CBO said the cumulative debt would be the same size as the overall Gross Domestic Product in 10 years' time.

The rising deficit means that a larger part of the government's spending is paid for voluntarily by investors rather than compelled payments taken from taxpayers. But getting to that level requires Congress to enact more than $1 trillion in spending cuts over the next decade-something that seems well beyond the realm of fantasy and nearing the border of complete political impossibility.

The CBO's report has been revised to incorporate the effects of a new $1.3 trillion government spending bill and the $1.5 trillion in Republican-led tax cuts approved a year ago. In 2019, the agency said, the shortfall will total $981 billion.

To assuage conservative anger over the spending bill, House Republicans plan to hold a vote this week on a balanced budget amendment to the Constitution.

"That increase reflects significant growth in mandatory spending - mainly because the aging of the population and rising health care costs per beneficiary are projected to increase spending for Social Security and Medicare, among other programs".

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

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