The combined effects of Donald Trump's tax cuts and last month's budget-busting spending bill is sending the U.S. budget deficit toward the $1tn mark next year, according to a new analysis by the Congressional Budget Office. CBO also projects 3.3 percent GDP growth in 2018 and 2.4 percent in 2019 - both higher estimates than CBO forecast previous year.
But those growth rates will not offset the deficits, which will "increase rapidly this year and over the next few years", then stabilize, resulting in a projected cumulative deficit of $11.7 trillion for 2018-2027, CBO forecast. 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.
"During a time of low unemployment and economic expansion, we should be taking reasonable steps to put our debt on a sustainable path - but instead we are piling up trillions of bills", he said. At the same time, the long-term budget forecast counters the GOP's arguments that tax cuts will pay for themselves through economic growth.
"The federal budget deficit grows substantially over the next several years", CBO Budget Director Keith Hall said Wednesday after his agency released the report. The gap between spending and revenues will balloon over 1 trillion dollars in fiscal 2020 and keep expanding for years.
In fact America could be staring at a decade where the size of its debt and budget deficit starts growing faster than the economy, and if the economy slows, then the situation will worsen dramatically. 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. The CBO projects that this debt will rise from 78 percent of GDP this year to 96.2 percent in 2028.More news: Expenses rack up for family trying to return dead son's body home
Annual deficits topped $1 trillion from 2009 to 2012, because of greater spending on social safety net programs and economic stimulus, as well as slumping tax receipts as the economy cratered.
"Productivity growth returns to almost its average over the past 25 years and recent changes in fiscal policy boost incentives to work, save, and invest; nonetheless, economic growth is held down by slower growth of the labor force", the CBO said.
"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".
The figure would be even larger if the tax cuts for individuals and families do not expire as scheduled.
By 2028, the government will spend $7 trillion: $4.5 trillion of that on entitlements, $1.6 trillion on defense and domestic discretionary programs, and a staggering $915 billion on interest payments.