US Budget Deficit to Surpass $1 Trillion by 2020

Trump tax cuts forecast to send US deficit to $1 trillion in 2020

Changes in United States tax laws, the $1.3 trillion federal spending plan for 2018 and an anticipated slowdown in U.S. economic growth are expected to push the budget deficit to historically high levels totaling almost 100 percent of gross domestic product by 2028, the Congressional Budget Office (CBO) predicted in a report on Monday.

The new CBO projection is the first since President Donald Trump signed a tax cut that is expected to cost the government almost $1.9 trillion over 11 years, then signed legislation to significantly boost military and domestic spending over the next two years.

Debt held by the public, which has doubled in the past 10 years as a percentage of gross domestic product (GDP), will approach 100 percent of GDP by 2028.

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

The short-term boost also comes at a significant price: The government will run a deficit of $804 billion this year, which is much bigger than last year's $665 billion tally. The gap between spending and revenues will balloon over 1 trillion dollars in fiscal 2020 and keep expanding for years.

Donnelly said, "This report confirms my serious concerns about the ballooning deficit, which Speaker Ryan has said he wants to pay for through cuts to Medicare and Social Security, putting seniors and retirees at risk".

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Some Republicans argued vociferously during the tax debate that tax cuts in the bill would pay for themselves, with Treasury Secretary Steven MnuchinSteven Terner MnuchinGOP tax law will add.9 trillion to debt: CBO CBO projects booming deficits Technology firms oppose tariffs, support negotiations with China MORE going so far as to say that they would ultimately reduce the national debt and deficits.

The report cites 2017 tax legislation and the $1.3 trillion bipartisan budget for 2018, which increased spending caps, as key reasons for a growing budget shortfall, as well as an assumption that annual economic growth will remain below 2 percent after a temporary surge this year and next.

"That is unacceptable", said Sen. CBO attributes these economic trends to the three major laws mentioned above, along with rising federal budget deficits over the ten-year window. Growth will be primarily driven by business investment, consumer spending and federal spending.

He also warned against the Republicans' push for a balanced budget amendment to the Constitution, saying it would tie policymakers' hands during economic downturns, preventing them from injecting any spending stimulus.

There is a nightmare scenario in which borrowers lose faith in the country's ability to pay back its debts, demanding higher interest rates on their loans and setting off a spiral of larger deficits and still-higher rates.

Economists from both sides of the aisle agree that a debt crisis is looming. And it would be much higher than the 96% of GDP that the agency estimates if the tax cuts and spending increases expire as scheduled.

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