US Federal budget deficit projected to top $1T in 2020

12 April, 2018, 00:53 | Author: Courtney Reynolds
  • Trump tax cuts forecast to send US deficit to $1 trillion in 2020

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

With the passage of deep tax cuts late a year ago, annual United States budget deficits are expected to balloon over the next decade, the nonpartisan Congressional Budget Office said on Monday.

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. But it's worth remembering Republicans insisted they didn't need to find offsets for their tax package previous year because the cuts would pay for themselves through new economic growth. There is no such emergency, though.

If the Republicans really wanted to lock in their tax cuts, they needed spending restraint. CBO assumes deep cuts to discretionary spending will take place. It includes defense, infrastructure, medical research, and many other things - most of what government does other than writing checks to retirees and the poor.

Neither party actually wants to implement deep cuts to these programs (despite all the hot air from republicans and groups such as the Tea Party and Donald Trump).

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"The legislation has significantly reduced revenues and increased outlays anticipated under current law", the CBO said. The Trump tax cuts were designed with permanent cuts for corporations and heirs of large estates, coupled with temporary, expiring tax cuts for the middle class.

That budget gap - the amount by which the USA government spending exceeds revenue - is then forecast to remain above $1 trillion through 2027.

The government's mounting debt has seemed of little effect on Capitol Hill in recent months as Republicans in Congress successfully worked to pass a sweeping package of tax cuts. They could allow the middle-class tax cuts to expire, assuming Democrats would go along with extending them at some point later on. But many say it is virtually certain to fail.

The CBO reported that from 2021 to 2028, deficits will average 4.9 percent of the total American economy - higher than at any point since World War II other than during the recession in 2008 and 2009. If your deficit is growing at two to three times the rate of the economy, you are running into a unsafe situation, which could become a crisis if an expensive event takes place. The deficit settled below $500 million for part of Obama's second term but has steadily risen since then. "We have clear evidence that the McConnell-Ryan tax law is blowing a hole in our federal budget and contributing to higher costs for families accessing health through the marketplace". But the current deficit increases come amid steady economic growth and low unemployment, a time when many economists recommend paying down the deficit. There are a couple of big reasons why that could be mistaken.

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