Tuesday, 25 September, 2018

US Republicans preside over mammoth budget blowout

Trump tax cuts forecast to send US deficit to $1 trillion in 2020 CBO Predicts Persistently Large US Federal Deficit in Next Decade
Glenn Montgomery | 12 April, 2018, 00:45

Meanwhile, total debt is projected to reach 96 percent of gross domestic product, or almost $29 billion by 2028 - the highest total debt since WWII.

But the flurry of recent legislation is making it hard for Republicans to continue blaming President Barack Obama and Democrats for the government's fiscal condition. The Republican tax legislation, passed by Congress without Democratic support, along with a recent bipartisan $1.3 trillion spending package, are expected to drive economic growth faster than initially expected, CBO said.

While the GOP's tax cuts are a driving factor of new deficit spending, the tax cuts are also projected to boost earlier forecasts for economic growth and unemployment. The CBO's outlook shows the fiscal stimulus will sharply lift growth this year, before the expansion loses momentum as the Federal Reserve lifts interest rates.

The US budget deficit is set to top $1 trillion (£705bn) by 2020 - levels not seen since the financial crash and World War II. The government would borrow about 19 cents of every dollar it spend this year.

The independent financial scorekeeper said that the long-term USA debt, now more than US$ 21 trillion, could soar to more than US$ 33 trillion by 2028, with increasing annual deficits jumping from US$ 804 billion this year to US$ 1.5 trillion in a decade. Debt held by the public will stand at a staggering $29 trillion by 2028, the analysis said, prompting a warning from CBO Director Keith Hall. Now they are perfectly comfortable jacking the deficit back up to recession-crisis levels, merely because they want to hand out tax cuts to owners of wealth while increasing defense, and without forcing their constituents to bear the cost of the necessary trade-offs. The deficit is how much Washington's spending exceeds its revenues.

And, the gap between spending and receipts would balloon to just over $1tn by 2020 - some $200bn higher than previously predicted.

The vote is sure to fall well short of the two-thirds required to pass.

"Nobody knows what's too much debt - what will cause a fiscal crisis", he said, detailing the grim news.

"That is unacceptable", said Sen. Lindsey Graham, R-S.C. "We made a deal".

House Budget Committee Chairman Steve Womack (R-Ark.) said that the report "sheds light on our nation's current fiscal challenges and guides us in mapping out a sustainable path for the future".

As a result, federal debt is projected to be on a steadily rising trajectory throughout the coming decade. A bigger share of the annual government budgets - now about US$ 4 trillion - would have to be devoted to paying interest charges on the growing debt and could also lead to higher interest charges for USA businesses and consumers. The deficit settled below $500 million for part of Obama's second term but has steadily risen since then. CBO also projects 3.3 percent GDP growth in 2018 and 2.4 percent in 2019 - both higher estimates than CBO forecast previous year. CBO attributes these economic trends to the three major laws mentioned above, along with rising federal budget deficits over the ten-year window.

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