Trillion-dollar deficits come roaring back under Trump

Trillion-dollar deficits come roaring back under Trump

The combined effects of Donald Trump's tax cuts and last month's budget-busting spending bill is sending the U.S. budget deficit toward the $1tn mark next year, according to a new analysis by the Congressional Budget Office.

The report does say the USA gross domestic product is likely to grow faster than previously thought this year.

Former Fed Chair Janet Yellen, along with four other former chairs of the White House Council of Economic Advisers, write in today's Washington Post that the US deficit will be rising in the coming years primarily because of the tax cuts passed last year, not because spending, especially for entitlements, has increased.

"The legislation has significantly reduced revenues and increased outlays anticipated under current law", the CBO said.

CBO notes in its report that, if realistic assumptions are made about both these categories, then the fiscal picture would grow even worse: The deficit would consume 6.3 percent of the economy from 2023 to 2028, and rise to 7.1 percent of GDP by 2028. It warns that interest rates on government borrowing will spike, with the benchmark 10-year Treasury note, now yielding 2.8 percent, will average a 3.0 percent interest rate this year and 3.7 percent next year.

But those growth rates will not offset the deficits, which will "increase rapidly this year and over the next few years", then stabilise. The tax law is projected to add at least $1.5 trillion to the national debt over the next debate. In our projections, budget deficits continue increasing after 2018.

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This fiscal year, which ends September 30, the budget deficit is expected to total $804 billion, up from $665 billion last fiscal year, according to the CBO projections.

White House chief economic adviser Larry Kudlow defended the recently passed two-year budget that the Congressional Budget Office (CBO) says will increase the national debt and deficit even though in 2009 he attacked the Obama administration for doing the same thing.

President Donald Trump took office amid big promises to wipe out the country's more than $350 billion budget deficit over the next decade, but a recent report suggests balancing the budget is the latest Trump campaign promise to fall by the wayside. That is why the Republicans and Democrats agreed in March to ignore mandated spending cuts (in a previous agreement) and maintain those programs.

The CBO said the tax cuts and the additional spending will boost consumer demand, supercharging the economy. The political theory behind this combination was that Republicans needed to take advantage of their full control of government to pass the tax cuts Democrats opposed, which exclusively benefit the very rich.

"This high and rising debt matters because it harms our economy", said Peterson, whose group backs fiscal conservatism.

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