WASHINGTON — 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.
The CBO report, released Monday, says that that the twin tax and spending bills will push the budget deficit to $804 billion this year and just under $1 trillion for the upcoming budget year.
CBO says economic growth from the tax cuts will add 0.7 percent on average to the nation's economic output over the coming decade. Those effects will only partially offset the deficit cost of the tax cuts. The administration had promised the cuts would pay for themselves.
The economic growth promises to drop the nationwide unemployment rate below 4 percent, CBO predicts
The report paints an unrelentingly bleak picture of federal deficits, which would permanently breach the $1 trillion mark in 2020 unless Congress stems the burst of red ink. The government would borrow about 19 cents of every dollar it spend this year. Deficits would grow to $1.5 trillion by 2028 — and could exceed $2 trillion if the tax cuts are fully extended and if Washington doesn't cut spending.
Republicans controlling Washington have largely lost interest in taking on the deficit, and the issue has fallen in prominence in recent years. Trump has ruled out cuts to Social Security and Medicare, and Capitol Hill Republicans have failed to take steps against the deficit since Trump took office.
Now that conservatives complained about the $1.3 trillion catchall spending bill — which blew through previous budget limits by $300 billion over this year and next, House GOP leaders have scheduled a vote this week on a proposed amendment to the Constitution to require a balanced federal budget. The vote is sure to fall well short of the two-thirds required to pass. The White House is also likely to propose rolling backing some of the domestic spending increases in last month's government-wide funding bill.
Many economists believe that if deficits continue to rise and the national debt grows, government borrowing will "crowd out" private lending and force up interest rates. And if interest rates go up, the government would have to pay much more to finance the more than $14 trillion in Treasury debt held by investors.