The massive tax cuts signed into law in December, which Republicans said would pay for themselves, will balloon the us deficit in years ahead, the Congressional Budget Office said on Monday, possibly hobbling President Donald Trump's future agenda.
The CBO says that if current tax laws remain unchanged and spending stays the same, the federal budget deficit will grow substantially over the next few years. The deficit is how much Washington's spending exceeds its revenues. Meanwhile, total debt is projected to reach 96 percent of gross domestic product, or almost $29 billion by 2028 - the highest total debt since WWII.
Deficits will top $800 billion this year and will reach $1 trillion by 2020, just as President Trump prepares to face voters in his bid for re-election.
However, the non-partisan CBO said the deficit - the difference between what the government spends and what it receives through tax receipts - is expected to rise to $804bn in 2018 from $665bn in the previous year.
There were $1 trillion deficit spending years most recently under President Barack Obama, primarily due to the economic downturn during the Great Recession, but deficit spending had been decreasing in recent years. 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.
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The CBO data clearly shows that revenue as a proportion of GDP was expected to have risen back to its 2017 level by 2023 even before the expiration of many tax cuts, showing that from then on its rising spending that is driving the worsening outlook in debt over this period. The Republican tax legislation, passed by Congress without Democratic support, along with a recent bipartisan $1.3 trillion spending package, are expected to drive economic growth faster than initially expected, CBO said.
"That is unacceptable", said Sen.
CBO director Keith Hall warns that rising debt raises the chance of a fiscal crisis in the years ahead. The Trump tax cuts were designed with permanent cuts for corporations and heirs of large estates, coupled with temporary, expiring tax cuts for the middle class. And if interest rates go up, the government will have to pay much more to finance the more than $14 trillion in Treasury debt held by investors.
The GOP's law to overhaul the USA tax code, signed by President Donald Trump in December, will cause the economy to grow faster than previously estimated, but at the expense of the federal deficit. Growth in actual GDP outpaces growth in potential (that is, maximum sustainable) GDP both this year and next, pushing the unemployment rate down. On Monday the Congressional Budget Office said the bill was partially responsible for a large increase in the deficit.
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