Published: Thu, April 12, 2018
World News | By Laverne Osborne

Trump's tax cuts to strengthen economic growth, raise deficit 'substantially': CBO

Trump's tax cuts to strengthen economic growth, raise deficit 'substantially': CBO

WASHINGTON (AP) - The combined effects of President Trump's tax cuts and last month's budget-busting spending bill is sending the government's budget deficit toward the $1 trillion mark next year, according to a new analysis by the Congressional Budget Office.

In CBO's economic projections, which underlie its budget projections, output grows at a faster pace this year than in 2017, as the recent changes in fiscal policy add to existing momentum in spending on goods and services. They will remain above $1 trillion for the foreseeable future, the analysts said, painting a better economic picture but a significantly worse fiscal picture than past year.

The Republican-led tax cuts deal, which was signed into law by Trump in last December, will cut taxes by 1.5 trillion dollars over 10 years.

Members of both parties further added to the deficit in March when they increased military and domestic spending by almost $300 billion over the next two years. After 2019, economic growth is projected to slow, eventually matching CBO's estimate of the economy's maximum sustainable rate of growth...

The CBO also reports that economic growth will lower the unemployment rate below 4 percent.

"The federal budget deficit grows substantially over the next several years", CBO Budget Director Keith Hall said Wednesday after his agency released the report. "That percentage would be the largest since 1946 and well more than twice the average over the past five decades".

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The deficit will be $1 trillion by 2020 and $1.3 trillion a year by 2025.

Numerous new major tax cuts and huge spending commitments introduced by the Donald Trump administration since he took office 18 months will really begin to be felt in terms of treasury coffers by the end of his first term. It is hard to imagine any cuts to Social Security, Medicare or other public programs, even though they make up a good portion of the budget - That would be a "political non-starter".

"Productivity growth returns to almost its average over the past 25 years and recent changes in fiscal policy boost incentives to work, save, and invest; nonetheless, economic growth is held down by slower growth of the labor force", the CBO said. Growth will be primarily driven by business investment, consumer spending and federal spending.

The figure would be even larger if the tax cuts for individuals and families do not expire as scheduled.

Trump has routinely ignored the debt and deficit. But in a sign that Republicans are growing concerned about the political liability of soaring deficits, the House will vote Thursday on a constitutional amendment to require balanced budgets.

The CBO also said the deficit would continue to climb over that decade.

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