The Associated Press WASHINGTON (AP) — The combined effect of U.S. 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 CBO report says the nation’s $21 trillion debt would spike to more than $33 trillion in 10 years, with debt held by investors spiking to levels that would come close to equaling the size of the economy, reaching levels that many economists fear could spark a debt crisis.
Republicans once laced into President Barack Obama for trillion-dollar-plus deficits but mostly fell quiet on Monday’s news.
CBO says 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, CBO 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 an unrelentingly bleak picture of the federal deficit, predicting it will hit $804 billion this year, rise to just under $1 trillion for the upcoming 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.
“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.