CBO forecasts the return of trillion-dollar deficits

Donald Trump's tax cuts and spending increases are forecast to inflate the US deficit

After the passage of the tax cut bill and a dramatic increase in spending in the most recent budget legislation, the Congressional Budget Office has issued new projections on spending, growth and deficits that predict $1.5 trillion deficits and modest growth.

The CBO's report has been revised to incorporate the effects of a new $1.3 trillion government spending bill and the $1.5 trillion in Republican-led tax cuts approved past year.

The deficit is expected to grow to more than 5 percent of gross domestic product. Underpinning the budgetary projections is CBO's economic forecast for the next decade, which incorporates the assumed economic effects of legislation enacted since CBO's last update, specifically the Tax Cuts and Jobs Act (TCJA) and the Consolidated Appropriations Act of 2018.

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. "A blowout spending bill is going to cause a problem, which is why the omnibus was awful", said Sen. The expiration of lower individual tax rates at the end of 2025 will add to slowed economic growth then, the CBO added.

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.

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.

Iran's Rouhani says US will regret if it scraps n
He added that the "foundations" of the deal "have been so strong that during these 15 months of pressure.the structure has remained solid".

While the deficit is on the rise, Congress doesn't seem to be likely to cut spending.

Republicans claimed their economic policies would pay for themselves by stimulating growth.

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. 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.

The CBO notes in its report that, if the tax cuts for lower income people are renewed by Democrats in the mid 2020's then the fiscal outlook will be much darker. This became law only weeks following the tax cut went to effect. President Trump has promised growth of over 3 percent, and based his economic policy on that sustained rate. While some members of Congress care about reducing deficits, it is now clear that the Republican majority in both chambers and the Republican in the White House have little interest in being responsible stewards of the federal purse.

Interest Payments: Interest payments on the debt will reach $915 billion in 2028.

Federal debt held by the public is already quite high by historical standards. All it will take are sizable tax increases.

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