Report shows US deficit to exceed US$1t next year
The United States federal budget deficit is expected to balloon to more than US$1 trillion in the next fiscal year under the first projections, taking into account the big budget deal that President Donald Trump and Congress reached this summer, the Congressional Budget Office, reported.
The return of US$1-trillion annual deficits comes despite Trump’s vow when running for office that he would not just balance the budget, but pay down the entire national debt.
“The nation’s fiscal outlook is challenging,” said Phillip Swagel, director of the non-partisan CBO. “Federal debt, which is already high by historical standards, is on an unsustainable course.”
The office on Wednesday upped this year’s deficit projection by US$63 billion and the cumulative deficit projection for the next decade by US$809 billion. The higher deficit projections come even as the CBO reduced its estimate for interest rates, which lowers borrowing costs, and as it raised projections for economic growth in the near term.
The number crunchers at CBO projected that the deficit for the current fiscal year will come to US$960 billion. In the next fiscal year, which begins October 1, it will exceed US$1 trillion.
The CBO said the budget deal signed into law earlier this month, which took away the prospect of a government shut-down in October and the threat of deep automatic spending cuts, would boost deficits by US$1.7 trillion over the coming decade. Increased spending on disaster relief and border security would add US$255 billion. Downward revisions to the forecast for interest rates will help the picture, trimming US$1.4 trillion.
Swagel said the federal debt will rise even higher after the coming decade because of the nation’s ageing population and higher spending on healthcare.
To put the country on a sustainable footing, Swagel said, lawmakers will have to increase taxes, cut spending or combine the two approaches.
The CBO projects that the economy will expand more slowly, from 2.3 per cent this year to 1.8 per cent on average in the next four years. The assumption reflects slower growth in consumer spending and government purchases, as well as the effect of trade policies on business investment.
It also projects the unemployment rate will remain close to its current level of 3.7 per cent through the end of 2020 and then rises to 4.6 per cent by the end of 2023.
The CBO’s estimate is the first to reflect the hard-won budget and debt deal signed into law earlier this month.
“The recent budget deal was a budget buster, and now we have further proof. Both parties took an already-unsustainable situation and made it much worse,” said Maya MacGuineas, president of the private Committee for a Responsible Federal Budget.
MacGuineas said lawmakers should ensure the legislation they enact is paid for and redouble efforts to control the growth in healthcare costs and restore the solvency of the Social Security programme. Her organisation is focused on educating the public on issues with significant fiscal policy impact.
Senior White House adviser Kellyanne Conway pivoted to the president’s desire to fund the military and other programmes when asked about the report.
“We’re always concerned about the deficit,” Conway said. “We also need to fund a lot of the projects and programmes that are important to this country.”