CBO: Tax Cuts, Spending Driving Debt to Historic Levels

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

According to the Congressional Budget Office, the USA 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.

More noteworthy than the sheer magnitude of the projected deficits is the extent to which Congress and President Trump have spent the past year making them worse, approving large deficit-financed tax cuts in December and deficit-financed spending increases last month.

The last CBO report issued during the Obama administration said that after a $587 billion deficit in 2016, the shortfall was expected to break the $1 trillion mark in 2023, rising to $1.4 trillion in 2027.

More worrying for politicians the CBO projections and CBO also assumes significant tax increases toward the end of the 2020's because the Trump tax cuts were created to give permanent cuts to corporations and heirs of large estates, but linked these to temporary, expiring tax cuts for the middle class.Trump and the Republicans were forced to do this because the $US1.5 trillion budget limit did not allow them enough money to cut all the taxes they wanted to cut.

Under that scenario, deficits could reach $2 trillion a year within a decade, watchdogs said.

"Anyone who argues this course can continue is living with blinders", said Campaign to Fix the Debt Co-chairmen Judd Gregg, a former GOP senator, and Ed Rendell, a former Democratic governor. After that, however, the CBO expects economic growth to slow, largely due to slower growth in the labor force. "Most of this growth is driven by consumer spending and business investment, but federal spending also contributes a significant amount this year", Hall said.

The POTUS has indeed surprised the country, as according to the CBS' estimate, the 2018 deficit is $242 billion more than the office calculated past year.

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The Congressional Budget Office is projecting that the federal debt will rise steadily over the next 10 years to almost 100% of GDP by 2028 - an amount "far greater than the debt in any year since just after World War II".

The CBO released analysis Monday detailing how the federal budget deficit will be $804 billion in 2018 and exceed $1 trillion in 2020. The deficit will average 4.9 percent of GDP over the 2019-2028 period, exceeding average economic growth over the same period by almost a percentage point.

"Productivity growth returns to almost its average over the past 25 years and recent changes in fiscal policy boost incentives to work, save, and invest; nonetheless, economic growth is held down by slower growth of the labor force", the CBO said. And they don't buy the Laffer Curve nonsense peddled in the United States and here by tax cut advocates, that company tax cuts will be so stimulatory that they'll produce a net tax revenue increase. 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.

The CBO also estimated that the stimulus effect of the tax cuts will add 0.7 percent on average to the nation's economic output over the coming decade.

By 2028, the government will spend $7 trillion: $4.5 trillion of that on entitlements, $1.6 trillion on defense and domestic discretionary programs, and a staggering $915 billion on interest payments.

To assuage conservative anger over the spending bill, House Republicans plan to hold a vote this week on a balanced budget amendment to the Constitution. 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.

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