Federal Deficit Growing Faster Than Expected, Will Top $1 Trillion Next Year, Budget Office Says
WASHINGTON – The federal budget deficit is growing faster than expected and will reach $1 trillion next year, the non-partisan Congressional Budget Office said Wednesday.
Worse, over the next decade, the federal government will rack up $12.2 trillion in deficits — $809 billion more than the CBO’s last projection in May.
The projected federal budget deficit for 2019, $960 billion, is up by $63 billion since May all by itself.
The Budget Update and Economic Outlook released Wednesday said deficits would average 4.7 percent of GDP through the next decade, a significant increase from the 2.9 percent average over the past 50 years.
As a result of those deficits, federal debt held by the public is projected to grow steadily, from 79 percent of GDP in 2019 to 95 percent in 2029—its highest level since just after World War II.
“Deficits are now expected to be larger than previously projected, primarily because recently enacted legislation raised caps on discretionary appropriations for fiscal years 2020 and 2021,” said CBO Director Phillip L. Swagel in an accompanying statement.
Fueling the increase from May’s projection is the bipartisan deal to raise spending caps, which would add $1.7 trillion to the deficit over the course of the next decade, the CBO said, adding that it expects the increase to continue to grow at the rate of inflation in future years.
Additionally, the CBO said, the enactment of supplemental appropriations for disaster relief and border security for 2019, which the CBO also assumed would grow with inflation in future years, adding $255 billion.
The deficit projections would have been even higher were it not for a decrease in interest rates, which lowered projected net interest spending by $1.4 trillion over the decade.
“The nation’s fiscal outlook is challenging,” Director Swagel said. “Federal debt, which is already high by historical standards, is on an unsustainable course, projected to rise even higher after 2029 because of the aging of the population, growth in per capita spending on health care, and rising interest costs.
“To put it on a sustainable course, lawmakers will have to make significant changes to tax and spending policies—making revenues larger than they would be under current law, reducing spending below projected amounts, or adopting some combination of those approaches,” he said.
Wednesday’s report comes a day after the president said he’s considering a number of additional tax cuts to stimulate the U.S. economy. These include a reduction in the capital gains taxes, a decision that would add an estimated $100 billion to deficits over the next decade.
Similarly, a payroll tax cut Trump discussed with reporters on Tuesday would potentially reduce revenues by $75 billion a year for every percentage point cut in payroll tax rates.
Predictably, budget hawks were infuriated by the CBO report.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, faulted both parties for their roles in enacting this summer’s budget deal, saying they took “an already unsustainable situation and made it much worse.”
“Between the budget deal, the tax cuts, and other recent unpaid-for legislation, policymakers have roughly doubled near-term deficits over just the past few years. Shame on them for not instead reducing projected debt to give us more room to fight the next recession and manage the aging of the population,” MacGuineas said.
“Fortunately, it’s still not too late to make things right,” she said. “As a first step, policymakers should pledge to pay for all extensions of existing policies and new legislation so we can put an end to this downward fiscal spiral. They should also redouble their efforts to control health care cost growth, restore Social Security solvency, and gradually bring revenue and spending more closely in line rather than further apart.”
Last month, the Peter G. Peterson Foundation’s monthly Fiscal Confidence Index, modeled after the Consumer Confidence Index, registered a 52 (100 is neutral), which the organization said indicated that voters want lawmakers to manage the debt and place the nation on a stronger, more sustainable course.
More than four in five (83%) Americans said they want federal lawmakers to spend more time addressing the national debt, including 85% of Democrats, 82% of Republicans and 81% of independents.
A majority of Americans (56%) said that efforts to address the national debt are on the wrong track, rather than heading in the right direction (33%). That concern was equally high among the youngest and oldest groups (57% of both 18 to 34 year olds and those 65 and older).
Sixty-two percent of voters said their level of concern about the national debt has increased over the last few years, including 41% who say their concern has increased “a lot.”
On Wednesday, Michael A. Peterson, PGPF’s CEO, said, “We all know we are already on a troubling fiscal path, but today’s CBO report shows us that our leaders are making things considerably worse.
“As we borrow more from tomorrow to pay for today, interest will consume a larger and larger part of the budget, limiting our options and threatening economic opportunities for the next generation,” Peterson said. “The good news is that there is no shortage of options to manage the debt and address key priorities like climate change and national security at the same time. The sooner leaders get to work, the easier and less costly it will be.”
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