WASHINGTON – Trillion-dollar budget deficits are returning next year, and $2 trillion-plus deficits are not far off in the wake of President Donald Trump’s tax cuts and last month’s big budget deal, a private group warned in a new analysis Friday.
The analysis, by the Committee for a Responsible Federal Budget, says the separate tax and spending measures, along with increased borrowing costs, promise to add $6 trillion to the nation’s already rapidly rising debt in the coming decade.
It assumes that Washington continues to fail to take steps to rein in spending and that the tax cuts and budget-busting spending deal are made permanent. If so, the government’s yearly deficit would grow to $2.4 trillion in 10 years.
By contrast, Trump’s recent budget plan – which relies on greater economic growth than most other forecasts and promises deep, unlikely cuts to domestic agencies – says the 2028 deficit could be brought down to less than $400 billion.
The group, which advocates for smaller deficits and curbing federal benefit programs such as Medicare, warns “these projections show a fiscal situation that is clearly unsustainable.”
The Congressional Budget Office, which issues the budget projections followed by Congress, will issue its updated figures next month. Republicans controlling Congress and the White House have signaled they won’t take on the daunting task of tackling the deficit this year. Trump is opposed to cutting Social Security and Medicare retirement benefits.
Deficit hawks have long warned that the federal fiscal picture will eventually lead to a debt crisis, with government borrowing forcing up interest rates and the nation’s $20 trillion-plus debt serving as a drag on the economy. A more dovish view holds that the American economy can handle large amounts of government borrowing and debt and that trillion-dollar deficits aren’t as dangerous as they used to be when measured against the size of the economy.
The official deficit cost estimate for last year’s tax cuts is $1.4 trillion over the coming decade, though that figure could be artificially low since most of the cuts for individuals expire after seven years. If all of the provisions are extended, an additional $1.1 trillion would be added to the debt.
Similarly, last month’s budget deal would add $320 billion in new spending over the next two years, but it would add $1.4 trillion to the deficit if extended through 2028, the group estimates.
The government spent a total of $4 trillion last year and ran a $665 billion deficit that required it to borrow 17 cents of every dollar it spent. Under the group’s findings, the deficit would hit $2.4 trillion in 2028, requiring the government to borrow about 34 cents or so of every dollar it spends.
“Legislation enacted since June of 2017 has turned a dismal fiscal situation into a dire one,” the group warns. “Revenue is lower, spending is higher, deficits are larger, and the national debt is rapidly headed toward a new record.”
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