United States deficit to surpass $1 trillion two years ahead of estimates
11 April, 2018, 12:43 | Author: Irene Delgado
According to the Congressional Budget Office, the US budget deficit is expected to grow over the next few years due to tax cuts that were approved back in December by Republicans in Congress and POTUS Donald Trump. The trillion-dollar-plus deficits shrank to back to average size in recent years, but as this CBO report showed, it is set to take a nosedive yet again - thanks to increasedspending and large tax cuts.
Jeff Stein, The Washington Post •.
Over the 2018-2027 period, CBO estimates the cumulative deficit would be $1.6 trillion larger than the June projection - $11.7 trillion rather than $10.1 trillion.
As a result, federal debt is projected to be on a steadily rising trajectory throughout the coming decade. And they don't buy the Laffer Curve nonsense peddled in the USA and here by tax cut advocates, that company tax cuts will be so stimulatory that they'll produce a net tax revenue increase.
In the near term, a rosier-than-expected economic outlook for individuals offered by the CBO could boost the Republican economic message as Trump's party seeks to retain control of Congress in the November midterm elections.
The CBO report said the twin tax and spending bills will push the budget deficit to $804bn this year and just under $1tn for the upcoming budget year.
Budget-watchers have been predicting the return of trillion-dollar deficits for months. No serious effort was made to offset the lost revenue and spendingincreases.
The national debt, which has topped $21 trillion, is expected to soar to more than $33 trillion in 2028. The CBO released an alternative fiscal scenario in its report, taking into account changes that more closely represent current policy trends. On the Senate floor, Minority Leader Chuck Schumer (D-N.Y.) said the report is "a reminder of how unserious the current Republican Party is about deficits". During the campaign he advocated protecting numerous expensive programs - including Social Security and Medicare - and never squared the fiscal impact of the tax cuts he also favored. After that, however, the CBO expects economic growth to slow, largely due to slower growth in the labor force. "Analysts have said for years that a debt problem was looming on the horizon", said Shai Akabas, economic policy director at the Bipartisan Policy Center.
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Ultimately, neither party appears to have a deficit-reduction proposal that could get enough support from the other to pass. Regardless of where you land on the political spectrum, taxpayers should agree that CBO's numbers are alarming and politicians' insatiable appetite for massive deficitspending must be restrained.
It's also true that the White House's official budget projects a mere $363 billion deficit in 2028.
The government has been able to finance its debt relatively cheaply because of a decade of historically low interest rates since the recession.
And as the government borrows more, it risks crowding out private investment that would have stimulated more economic growth, the CBO warned. If the United States recovery becomes a slow down, then debt and deficit will rise even faster.
"The bigger the debt, the bigger the chance of a fiscal crisis", Hall said Monday.
The longer we wait, the more painful the solutions will be. Visit MarketWatch.com for more information on this news.
Federal debt held by the public is already quite high by historical standards.
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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