CBO Analysis: Tax cuts, spending to raise deficit to $1T by 2020

CBO Analysis: Tax cuts, spending to raise deficit to $1T by 2020

Total deficit spending will increase by $11.7 trillion over the next 10 years, including an additional $1.58 trillion because of changes like the GOP tax law and the omnibus spending bill, according to a new report released by the Congressional Budget Office.

"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 the last fiscal year ending last September, the deficit was US$ 665 billion.

The budget deficit is then expected to grow to $1 trillion by 2020.

CBO stated that, "Such high and rising debt would have serious negative consequences for the budget and the nation".

Interest rates are expected to rise in the years ahead which will make interest payments on the national debt even more expensive and could lead to cutbacks in other government spending, from social programs to the military.

"It's going nowhere", said Sen.

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The analysis "confirms that major damage was done" by the new tax law and the spending bill, said Michael Peterson, head of the non-partisan Peter G. Peterson Foundation. "Most of this growth is driven by consumer spending and business investment, but federal spending also contributes a significant amount this year", Hall said.

House Republican leaders have scheduled a vote this week on a Constitutional amendment to require a balanced federal budget. In our projections, budget deficits continue increasing after 2018. A bigger share of the annual government budgets - now about US$ 4 trillion - would have to be devoted to paying interest charges on the growing debt and could also lead to higher interest charges for USA businesses and consumers. But now the Federal Reserve is raising rates, meaning the government's borrowing costs are projected to increase. After that, however, the CBO expects economic growth to slow, largely due to slower growth in the labor force. 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. "The bigger the debt, the bigger the chances of a fiscal crisis".

Even then, however, budget deficits north of $2 trillion might not be far off, she noted.

"It's all hand-waving and conjecture: There's no grounding in valid economic principles that this is a debt crisis", said Stephanie Kelton, a left-leaning economics and public policy professor at Stony Brook University and a former economic adviser to Sen.

America last ran annual budget surpluses from 1998 to 2001, amid healthy growth in the economy at the end of President Bill Clinton's administration.

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