Red ink will spill even faster over the next decade than projected as recently as last summer, the Congressional Budget Office (CBO) reported Monday.
The number crunchers forecast that this year’s deficit will be $242 billion larger than the budget office forecast in June. The CBO attributes $194 billion of that to the tax cut Congress passed and President Donald Trump signed in December.
Accumulated debt through fiscal year 2027 is $1.6 trillion greater than the $10.1 trillion estimate projected in June. That is due to $1 trillion less in revenue and over $500 billion in additional spending.
As a result, debt held by the public will approach the size of the entire economy by 2028. That would be the highest since 1946 — when the United States was coming out of World War II — and more than twice the average amount over the past five decades.
Analysts across the political spectrum expressed alarm over the debt, even if they did not always agree on the most significant causes. Michael Peterson, president and CEO of the Peter G. Peterson Foundation, expressed concern that debt will harm the economy in the long run.
“Today’s CBO report confirms that major damage was done to our fiscal outlook in just the past few months,” he said in a statement. “This is the first forecast to take into account the recent tax and spending legislation, and it’s clear that lawmakers have added significantly more debt on top of an already unsustainable trajectory.”
Ben Ritz, director of the Center for Funding America’s Future at the Progressive Policy Institute, seized on the Trump tax cuts.
“The national debt is now on track to reach unprecedented heights over the next decade, thanks to the policies adopted by Donald Trump and the Republican-controlled Congress,” he said in a statement.
Others, however, argued that the CBO is underestimating the positive economic impact of the tax cuts. The forecast envisions growth averaging 2 percent a year from 2018 through 2022, up from the 1.5 percent average growth from 2008 through last year — but well below the 3.2 percent average since 1950.
Growth then will slow down, averaging 1.8 percent from 2023 through 2028, according to the forecast.
“The one thing we know about the CBO and economists as a whole is they’re always wrong,” quipped Rick Manning, president of Americans for Limited Government.
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Manning argued that the budget office fails to account fully for the stimulative effects of massive reserves of cash that American-based businesses are expected to bring back to the United States from foreign accounts as a result of changes to the tax law.
“In fact, you are looking at a massive infusion of money into the economy,” he said.
“It’s probably worse than we thought it was, and it’s downright embarrassing for the party that says it cares about deficits.”
Manning said debt is a concern, but mainly because of massive new spending Congress passed earlier this year. He said lawmakers could limit that damage by converting the added spending into one-time projects rather than including it as the new baseline for future spending. Not doing so would ensure that spending levels are permanently higher.
Jason Pye, vice president of legislative affairs at FreedomWorks, said the CBO report shows how seriously Republican lawmakers betrayed conservatives with that spending plan.
“It’s probably worse than we thought it was, and it’s downright embarrassing for the party that says it cares about deficits,” he said.
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Pye said the CBO always underestimates economic growth.
“We don’t have a revenue problem in the United States. Congress has a spending problem,” he said, noting the economy now is growing and at full employment. “This is when we should be cutting spending.”
The CBO projects that the debt could be even higher, however. For instance, more than 50 revenue provisions are set to expire over the next decade, including parts of the individual income tax cut included in the tax reform law. Congress could extend those.
If those and other changes were made, it would increase deficits as measured against the gross domestic product (GDP) by a full percentage point. That would increase new debt by $2.6 trillion through 2028, and debt held by the public would total 105 percent of GDP by that year.
Pye said Republicans need to honor campaign promises and hold spending in line.
“This is the stuff they run once every two and six years … They have to start governing the way they campaign,” he said.