Budget Deficit Poised to Break $1 Trillion Despite Strong Economy
WASHINGTON – The federal budget deficit will likely top $1 trillion this year, despite the continued strength of the U.S. economy, the nonpartisan Congressional Budget Office said Tuesday.
The report follows an increase in new spending last year and the repeal of several taxes that had been used to help finance the Affordable Care Act.
If the forecast proves true, which is expected, it would be the first time the deficit has topped $1 trillion since 2012, which at the time was the fourth consecutive year the federal government had reached that dubious milestone.
Most economists interpret the dangers associated with the deficit by measuring it against the size of the overall economy. Any deficit that comes in at 3 percent or less of gross domestic product is seen as relatively sustainable.
However, the latest report suggests deficits will average 4.8 percent of GDP over the next decade.
“As a result of those deficits, federal debt would rise each year, reaching a percentage of the nation’s output that is unprecedented in U.S. history,” the CBO report says.
The government reported a $984 billion deficit for the 2019 budget year. Cumulative deficits over the coming decade are expected to total $13 trillion — a total that would have gone higher save for CBO’s belief that yields on Treasury notes will remain unusually low as the government refinances its $23 trillion debt.
The recent surge in the deficit follows passage of the 2017 Trump tax bill, which has failed to pay for itself with additional economic growth and revenues as promised by the president and administration officials.
House Majority Leader Steny Hoyer, D-Md., said, “All Americans ought to be alarmed by the CBO’s new projections.”
He then went on to assail President Trump and his allies for promising the tax cuts would pay for themselves.
Instead, he said, “In return for very little short-term economic growth, our children and grandchildren will have to pay trillions, year after year, in repayment.”
Hoyer urged the president and Senate Republicans to work with House Democrats to build on last year’s bipartisan budget agreement and “strive for real action to make our budgets more sustainable.”
Michael Peterson, CEO of the Peter G. Peterson Foundation, which is dedicated to raising awareness of America’s long-term debt, and how it affects economic growth, said Tuesday’s report is “a sad reflection of our nation’s poor fiscal health, and it adds insult to injury that we’re piling on all this debt in a growing economy.
“It’s important to recognize that it’s not just the large amount of deficit spending that’s a problem, it’s that we are borrowing for current consumption rather than investments,” he said. “It would be one thing if we were running up deficits to fund investments in the future, but that’s not what’s happening. Investments are only a tiny fraction of the base budget and are not driving the deficit increases in this outlook.
“If a policy is important enough to enact, it should be important enough to pay for. Our leaders owe it to the next generation to set priorities, make tradeoffs and put our nation on a more sustainable path.”
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