The combined effects of Donald Trump’s tax cuts and last month’s budget-busting spending bill is sending the US budget deficit toward the $1tn mark next year, according to a new analysis by the Congressional Budget Office.
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. Economic growth from the tax cuts will add 0.7% on average to the nation’s economic output over the coming decade, the analysis said, only partially offsetting the deficit cost of the tax cuts.
The Trump administration had promised the cuts would pay for themselves. The economic growth promises to drop the nationwide unemployment rate below 4%, the CBO predicted.
Donald Trump is making America’s deficits great again
The report paints an unrelentingly bleak picture of federal deficits, which would permanently breach $1tn in 2020 without action by Congress. The government would borrow about 19 cents of every dollar it spends this year. Deficits would grow to $1.5tn by 2028 – and could exceed $2tn if the tax cuts are fully extended and if Washington does not cut spending.
Republicans controlling Washington have largely lost interest in taking on the deficit. Trump has ruled out cuts to social security or Medicare and Republicans on Capitol Hill have failed to take steps against the deficit since Trump took office.
After conservatives complained about the $1.3tn catchall spending bill passed last month – which blew through previous budget limits by $300bn over this year and next – House GOP leaders have scheduled a vote this week on a proposed amendment to the constitution to require a balanced federal budget. The vote is sure to fall well short of the two-thirds majority required to pass.
The White House is also likely to propose rolling backing some of the domestic spending increases in the government-wide funding bill.
Many economists believe that if deficits continue to rise and the national debt grows, government borrowing will “crowd out” private lending and force up interest rates. If interest rates go up, the government would have to pay much more to finance the more than $14tn in treasury debt held by investors.