Trillion-Dollar Deficits Are Back and Here to Stay

Trillion-Dollar Deficits Are Back and Here to Stay

Trillion-Dollar Deficits Are Back and Here to Stay

The U.S. budget deficit will surpass $1 trillion by 2020, two years sooner than previously estimated, as tax cuts and spending increases signed by President Donald Trump do little to boost long-term economic growth, according to the Congressional Budget Office.

A new report warns that the USA is heading for $1 trillion annual federal deficits, and the Congressional Budget Office says that's going to radically raise the nation's debt in just a decade.

The budget deficit will be 4.2% of the nation's gross domestic product in 2018, and will grow to 5.1% in 2022, the CBO estimates.

The projections are also greater than those projected by the CBO in June due to the tax cut legislation approved since then as well as the latest federal budget and appropriations acts.

However, the non-partisan CBO said the deficit - the difference between what the government spends and what it receives through tax receipts - is expected to rise to $804bn in 2018 from $665bn in the previous year. "They stood by that take on Tuesday, saying the CBO is wrong to estimate the tax law will actually boost deficits by almost $2 trillion". "A blowout spending bill is going to cause a problem, which is why the omnibus was awful", said Sen. Expirations for individual tax rates at the end of 2025 will slow economic growth as well. Regardless of where you land on the political spectrum, taxpayers should agree that CBO's numbers are alarming and politicians' insatiable appetite for massive deficit spending must be restrained. That deal paved the way for Congress to pass a $1.3 trillion spending bill last month.

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Republicans controlling Washington have largely lost interest in taking on the deficit. It predicts that government debt held by the public will swell to almost 100% of U.S. gross domestic product at the end of the 2020s.

The news came on Monday as tax cuts and federal spending hikes took effect.

The CBO released analysis Monday detailing how the federal budget deficit will be $804 billion in 2018 and exceed $1 trillion in 2020. 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.

It lifted its economic growth forecast for this year and next to 3.3% and 2.4% respectively. As a result, the tax cut ate into a larger base of expected tax revenue. It is hard to imagine any cuts to Social Security, Medicare or other public programs, even though they make up a good portion of the budget - That would be a "political non-starter".

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. Those surpluses turned to deficits after tax cuts under President George W. Bush, as well as sharp increases in military spending for the wars in Afghanistan and Iraq.

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