The non-partisan Congressional Budget Office (CBO) expects the Republican tax reform bill and 2018 congressional budget agreement to grow the economy over the coming years, but adds almost $2 trillion to federal deficit over the next decade.
"If current laws governing taxes and spending generally remained unchanged, the federal budget deficit would grow substantially over the next few years", the nonpartisan Congressional Budget Office wrote in its 10-year budget forecast, "with accumulating deficits driving debt held by the public to almost 100 percent of GDP by 2028". "That amount is far greater than the debt in any year since just after World War Two", it concluded.
The Congressional Budget Office said its projected increase in the 2018 budget deficit is due to new tax cuts and the March spending bill. After 2019, economic growth is projected to slow, eventually matching CBO's estimate of the economy's maximum sustainable rate of growth... 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. That would be the highest levels since 1946 and more than twice the average over the past five decades.
The CBO's report has been revised to incorporate the effects of a new $1.3 trillion government spending bill and the $1.5 trillion in Republican-led tax cuts approved past year.
Democrats seized on the report to blast the GOP tax law and portray Republicans as fiscally irresponsible.
"Now that those tax cuts are in place, I predict that deficits will once again morph into a dire problem - a scourge upon the nation - an excuse for Republicans to target Medicare, Medicaid, and Social Security for cuts", Schumer said.
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The CBO said the tax cuts and the additional spending will boost consumer demand, supercharging the economy.
To assuage conservative anger over the spending bill, House Republicans plan to hold a vote this week on a balanced budget amendment to the Constitution.
The CBO data clearly shows that revenue as a proportion of GDP was expected to have risen back to its 2017 level by 2023 even before the expiration of many tax cuts, showing that from then on its rising spending that is driving the worsening outlook in debt over this period. But such a measure has little chance of passing and the effort will largely be about political messaging.
"This high and rising debt matters because it harms our economy, by crowding out public and private investment, reducing our fiscal flexibility, and lowering confidence and certainty".
"We expect interest rates to accelerate faster", said CBO's Hall.