Saturday, 22 September, 2018

CBO: 2018 budget deficit to reach $804B

Donald Trump speaks during a campaign event in Hartford Conn. in April 2016 Donald Trump speaks during a campaign event in Hartford Conn. in April 2016
Jay Anderson | 12 April, 2018, 00:41

The CBO today forecasts the budget deficit - the amount Congress spends in excess of what it takes in from tax revenues - for 2018 will be $804 billion, will once again cross the $1 trillion threshold starting in 2020 and will continue to climb through 2028 with no end in sight. They will remain above $1 trillion for the foreseeable future, the analysts said, painting a better economic picture but a significantly worse fiscal picture than previous year.

In its 2017 projection, the CBO estimated that by 2027 the national debt would comprise 88.9 percent of the gross domestic product, just below the level at which economists say its load would itself harm the economy. It will average 3.8 percent this year and dip to 3.3 percent next year - the lowest figure in the post-World War II era. That deal paved the way for Congress to pass a $1.3 trillion spending bill last month.

That review looked at the impact of the Trump legislation which slashed cutting taxes by $US1.5 trillion over 10 years, followed by a bill passed in March that lifts ceilings on discretionary spending over two years. But the CBO projected Monday that the bill would boost economic growth 0.7 percent over a decade - not enough to keep it from adding to the deficit.




The CBO said that "such high and rising debt would have serious negative consequences for the budget and the nation", which would include limiting the government's flexibility to introduce new policies and making it vulnerable to fiscal shock. "That percentage would be the largest since 1946 and well more than twice the average over the past five decades".

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 past year. Deficits would grow to $1.5 trillion by 2028 - and could exceed $2 trillion if the tax cuts are fully extended and if Washington doesn't cut spending. CBO attributes these economic trends to the three major laws mentioned above, along with rising federal budget deficits over the ten-year window. The tax law is projected to add at least $1.5 trillion to the national debt over the next debate.

He also warned against the Republicans' push for a balanced budget amendment to the Constitution, saying it would tie policymakers' hands during economic downturns, preventing them from injecting any spending stimulus. While the benefits of tax reform should not be overlooked, including a projected high short-term GDP growth and low unemployment, the deficit and debt forecasts are daunting and need to be addressed. But such a measure has little chance of passing and the effort will largely be about political messaging.

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