Published: Thu, April 12, 2018
Research | By Sheri Schwartz

Budget Deficits And Debt Projections Look Much Worse Assuming "Current Policy"

Budget Deficits And Debt Projections Look Much Worse Assuming

But in their quest to pass significant legislation ahead of re-election campaigns later this year, congressional Republicans, with the support of President Donald Trump, adopted the US$ 1.5 trillion tax cut measure that has put more money in the paychecks of a large majority of American workers.

CBO says the federal deficit is projected to be $804 billion this year and will blow through $1 trillion by 2020, which is earlier than previously projected.

Last year's tax overhaul, the two-year budget deal that led to higher spending caps for this year and next and the $1.3 trillion fiscal 2018 omnibus spending bill are the main contributors to the worsening fiscal picture compared to last year.

Despite stronger-than-predicted economic growth ahead, the CBO said the deficit will grow to $804 billion in fiscal 2018, which ends on September 30, up from $665 billion in fiscal 2017.

The US hasn't run deficits exceeding a trillion dollars since 2012.

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The CBO notes in its report that, if the tax cuts for lower income people are renewed by Democrats in the mid 2020's then the fiscal outlook will be much darker. That amount is far greater than the debt in any year since just after World War II. Unemployment will decrease to 3.3 percent in 2019. 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. Over that period, the agency estimates revenue will be about 2 percent less than projected past year, and spending about 1 percent higher.

The national debt, which has topped $21 trillion, is expected to soar to more than $33 trillion in 2028. Now they are perfectly comfortable jacking the deficit back up to recession-crisis levels, merely because they want to hand out tax cuts to owners of wealth while increasing defense, and without forcing their constituents to bear the cost of the necessary trade-offs. Now, with total GOP control of Congress and the presidency, revenues have been cut while spending has increased - the opposite of fiscal conservatism and a sore spot with many GOP voters.

"Anyone who argues this course can continue is living with blinders", said Campaign to Fix the Debt Co-chairmen Judd Gregg, a former GOP senator, and Ed Rendell, a former Democratic governor.

Meanwhile, the House is scheduled to vote Thursday on a constitutional amendment that would prohibit Congress from spending more than the government takes in annually, unless a supermajority of both chambers votes to exceed those limits.

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