Published: Thu, April 12, 2018
Sci-tech | By Lila Blake

CBO projects deficit to hit $1T by 2019

CBO projects deficit to hit $1T by 2019

"If current laws governing taxes and spending generally remained unchanged, the federal budget deficit would grow substantially over the next few years", the nonpartisan Congressional Budget Office wrote in its 10-year budget forecast, "with accumulating deficits driving debt held by the public to almost 100 percent of GDP by 2028". According to the CBO, these adjustments are due primarily to the partisan McConnell-Ryan tax law from late 2017. On the contrary, the CBO projects the cuts will reduce federal revenue by $1.3 trillion over the next decade, a sum that climbs to $1.9 trillion including the extra interest payments. "From day one, the Republican agenda has always been to balloon the deficit in order to dole out massive tax breaks to the largest corporations and wealthiest Americans, and then use the deficit as an excuse to cut Social Security and Medicare".

But if warnings of a future fiscal crisis turn out to be true, lawmakers might be forced to take painful steps, Hall warned, that would be more draconian than if they tackled the deficit now.

Those cuts made when "the economy was already at or close to full employment ... turned economic logic on its head [and] this year's bipartisan spending agreement contributed further to the ill-timed stimulus", the authors write. Since such constitutional amendments require two-thirds of the House and Senate to agree, it is unlikely to pass Congress, let alone be ratified by the states.

"It's going nowhere", said Sen.

"Without question, we have challenging work ahead", said House Budget Committee Chairman Steve Womack, R-Ark., who promised he will be "working with my colleagues in the days ahead to craft a responsible budget plan".

For 2018, the deficit is expected to top $800 billion, about $140 billion more than the shortfall a year ago. If interest rates go up, the government would have to pay much more to finance the more than $14tn in treasury debt held by investors.

Republicans treated deficits of this scale as unsafe portents of civilizational collapse during Barack Obama's first term, when the economy was recovering from the greatest financial crisis in three-quarters of a century.

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. Growth in actual GDP outpaces growth in potential (that is, maximum sustainable) GDP both this year and next, pushing the unemployment rate down. This year's deficit - which is $139 billion more than 2017 - would account for 4 percent of the gross domestic product.

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