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Analysis: Tax cuts, spending to raise deficit to $1 trillion by 2019

By The Associated Press

This article was originally published April 9, 2018 at 1:19 p.m. Updated April 9, 2018 at 5:25 p.m.

in-this-march-23-2018-file-photo-a-copy-of-the-13-trillion-spending-bill-is-stacked-on-a-table-in-the-diplomatic-room-of-the-white-house-in-washington

In this March 23, 2018, file photo, a copy of the $1.3 trillion spending bill is stacked on a table in the Diplomatic Room of the White House in Washington.



WASHINGTON — The combined effect of President Donald Trump's tax cuts and last month's budget-busting spending bill is sending the federal deficit toward the $1 trillion mark next year, according to a new analysis by the Congressional Budget Office.

The report states the nation's $21 trillion debt would rise to more than $33 trillion in after 10 years, with debt held by investors increasing to levels that would come close to equaling the size of the economy.

Republicans once laced into President Barack Obama for trillion-dollar-plus deficits but mostly fell quiet on Monday's news.

The office said the economic growth from the tax cuts will add 0.7 percent on average to the nation's economic output over the coming decade. Those effects will only partially offset the deficit cost of the tax cuts. The administration had promised the cuts would pay for themselves.

Instead, Monday's report estimates that the GOP tax bill, which is Republican-controlled Washington's signature accomplishment under Trump, will add $1.8 trillion to the deficit over the coming decade, even after its positive effects on the economy are factored in.

The economic growth promises to drop the nationwide unemployment rate below 4 percent starting this year, the office predicts, though interest rates would rise more rapidly than the agency had earlier predicted, countering some of the positive economic impact of the tax cuts.

The report paints a bleak picture of the federal deficit, predicting it will hit $804 billion this year, rise to just under $1 trillion for the coming budget year and permanently breach the $1 trillion mark in 2020 unless Congress stems the burst of red ink.

The government would borrow about 19 cents of every dollar it spends this year. Deficits would grow to $1.5 trillion by 2028 — and could exceed $2 trillion if the tax cuts are fully extended and if Washington doesn't cut spending, according to the report.

"Such high and rising debt would have serious negative consequences for the budget and the nation," said CBO Director Keith Hall. "In particular, the likelihood of a fiscal crisis in the United States would increase."

Republicans controlling Washington have largely lost interest in taking on the deficit, an issue that has fallen in prominence in recent years. Trump has ruled out cuts to Social Security and Medicare, and Capitol Hill Republicans have failed to take steps against the deficit since Trump took office.

But if warnings of a future fiscal crisis turn out to be true, lawmakers might be forced to take painful steps, Hall warned, that would be more draconian than if they tackled the deficit now.

"Without question, we have challenging work ahead," said House Budget Committee Chairman Steve Womack, R-Ark., who promised he will be "working with my colleagues in the days ahead to craft a responsible budget plan."

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. The vote is sure to fall well short of the two-thirds required to pass and is being rushed to a vote without hearings or committee debate.

"The CBO's latest report exposes the scam behind the rosy rhetoric from Republicans that their tax bill would pay for itself," said top Senate Democrat Chuck Schumer of New York. "The American people deserve a Congress that is focused squarely on helping the middle class, not patronizing Kabuki theatre — like sham 'balanced budget' votes — from Republicans who blew up the deficit to benefit wealthy special interests."

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. 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.

Last year's deficit registered $665 billion, which was well below the record $1.4 trillion posted during Obama's first year in office, when the recession led to plunging revenues and an increase in spending. The deficit settled below $500 million for part of Obama's second term but has steadily risen since then.

The new report predicts the economy will grow by 3.3 percent this year but that gross domestic product growth will drop to 1.8 percent by 2020. It warns that interest rates on government borrowing will spike, with the benchmark 10-year Treasury note, currently yielding 2.8 percent, will average a 3.0 percent interest rate this year and 3.7 percent next year.

"We expect interest rates to accelerate faster," Hall said.

Read Tuesday's Arkansas Democrat-Gazette for full details.

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Comments on: Analysis: Tax cuts, spending to raise deficit to $1 trillion by 2019

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Displaying 1 - 7 of 7 total comments

hah406 says... April 9, 2018 at 1:30 p.m.

I am so freaking happy to finally find out from the GOP that all the crap they have been spewing during Obama's administration were just lies, and that deficits really don't matter at all. Or is it that they don't matter if you are giving money back to big corporations and the 1%?

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TimberTopper says... April 9, 2018 at 1:56 p.m.

hah, your last sentence pretty well summed it up.

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PopMom says... April 9, 2018 at 4:22 p.m.

Yep. Hah nailed it.

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mrcharles says... April 9, 2018 at 5:22 p.m.

"For if leisure and security were enjoyed by all alike, the great mass of human beings who are normally stupefied by poverty would become literate and would learn to think for themselves; and when once they had done this, they would sooner or later realize that the privileged minority had no function, and they would sweep it away. In the long run, a hierarchical society was only possible on a basis of poverty and ignorance.”

“Doublethink means the power of holding two contradictory beliefs in one's mind simultaneously, and accepting both of them.

Hah406. Live Long and Prosper!

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carpenterretired says... April 9, 2018 at 8:09 p.m.

Bingo to hah for his last sentence ,catch 22 now in ninth year of recovery business cycle time for next recession.

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thebulletpoint says... April 9, 2018 at 8:25 p.m.

It’s looking bleak, friends. We have been neglecting the dept for decades. This isn’t anything new. The dems nor the repubs can manage finances. Daddy’s got a spending addiction and the kids are gonna pay for it.

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BOLTAR says... April 10, 2018 at 9:48 a.m.

Republicans stripped of piety and frugality are revealed as the frauds they always were: inept war mongers and rapacious robber barons.

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