Donald Trump's tax cuts and spending increases are forecast to inflate the US deficit
11 April, 2018, 12:41
The U.S. Capitol building is seen in Washington Thomson Reuters WASHINGTON (Reuters) - The U.S. budget deficit will balloon over the next few years mainly because of deep tax cuts approved in December by Republicans in the U.S. Congress and President Donald Trump, the nonpartisan Congressional Budget Officesaid on Monday.
The deficit is expected to grow to more than 5 percent of gross domestic product.
The deficit is projected to reach $804 billion this year, a 21 percent increase over last year's $665 billion shortfall and $242 billion more than CBO projected in its June 2017 report.
"Today's CBO report underscores the reality that the Republicans' $1.5 trillion taxplan will increase our already large national debt", wrote Democratic Senator Chris Van Hollen in a statement. "In their craven haste to give corporations and the wealthiest 1% massive tax breaks, Republicans saddled our children and grandchildren with trillions of dollars of debt".
"During a time of low unemployment and economic expansion, we should be taking reasonable steps to put our debt on a sustainable path - but instead we are piling up trillions of bills", he said. The expiration of lower individual tax rates at the end of 2025 will add to slowed economic growth then, the CBO added.
"We expect interest rates to accelerate faster", said CBO's Hall.
With conservatives complaining about the $1.3 trillion catchall spending bill - which blew through previous budget limits by $300 billion 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 Republicans in their budget resolution allowed for the tax law to add $1.5 trillion to deficits, but insisted throughout the process that the impact on the debt would be minimal. He also asserted the media did not properly cover the deficit implications of the bipartisan 2018 spending bill that passed in March.
Given the rising deficits, the CBO now predicts that government debt held by the public will swell to almost 100% of United States gross domestic product at the end of the 2020s (9 in 2028).
Republicans claimed their economic policies would pay for themselves by stimulating growth. Spending over the period is expected to be 22.4 percent of GDP, unchanged from a year ago.
Real GDP will grow by 3.3% in 2018; 2.4% in 2019; and 1.8% in 2020, it said.
"Now that those tax cuts are in place, I predict that deficits will once again morph into a dire problem - a scourge upon the nation - an excuse for Republicans to target Medicare, Medicaid, and Social Security for cuts", Schumer said.
Current tax and spending policies are moving the country toward a vicious cycle of rising interest rates and even higher levels of debt. Only in 1945 and 1946 has the debt held by the public been higher.
"The sun rises in the east, and tax cuts result in less revenues".
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