Wednesday, 26 September, 2018

United States deficit forecast to hit $1 trillion following tax cuts

Budget-Deficit-3 United States deficit forecast to hit $1 trillion following tax cuts
Kenneth Drake | 11 April, 2018, 14:01

Instead the non-partisan CBO said the cumulative debt would be the same size as the overall Gross Domestic Product in 10 years' time.

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. And because it wasn't paid for, the BBA increased the deficit by $320 billion and set the stage for a $1.7 trillion increase if the bill is extended without offsets. Notably, and in keeping with the anti-intellectual spirit of the times, conservatives have not even bothered formulating a rationale for increasing the deficit during the peak of an economic expansion.

For 2018, the deficit is expected to top $800 billion, about $140 billion more than the shortfall previous year.

No matter what the economic indicators imply, the Trump administration doesn't hesitate from making wildly exaggerated claims, as the White House spokesperson Raj Shah said on Fox News that the Trump budget "has over $3 trillion dollars in deficit reduction, which is the largest deficit reduction of a budget in terms of a 10-year outlay that we've ever seen".

The CBO said the tax cuts and the additional spending will boost consumer demand, supercharging the economy. "Those projected effects grow in the earlier years of the period and become smaller in the later years".


Despite the increased debt burden, the CBO predicts the real GDP will rise to 3.3. percent in 2018 with the average growth over the next decade to be at 1.9 percent. When some provisions of the tax act expire afterward, revenues are projected to top 18% from 2026 to 2028. But now the Federal Reserve is raising rates, meaning the government's borrowing costs are projected to increase. The political theory behind this combination was that Republicans needed to take advantage of their full control of government to pass the tax cuts Democrats opposed, which exclusively benefit the very rich. On Monday the Congressional Budget Office said the bill was partially responsible for a large increase in the deficit.

Today, the Congressional Budget Office (CBO) released its annual Budget and Economic Outlook for 2018 to 2028.

The CBO also reports that economic growth will lower the unemployment rate below 4 percent. The economic growth from the $1.5 trillion in tax cuts will add 0.7% on average to the nation's economic output over the coming decade, even though the president said they would pay for themselves.

A new report warns that the U.S. 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 $804 million is well above the $665 million shortfall the government ran up past year.

But any genuine effort to curb spending is a nonstarter this year.

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