Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Republican tax cuts to fuel historic U.S. deficits: CBO

Economic IndicatorsApr 09, 2018 07:06PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. The U.S. Capitol building is seen in Washington

By Amanda Becker

WASHINGTON (Reuters) - The massive tax cuts signed into law in December, which Republicans said would pay for themselves, will balloon the U.S. deficit in years ahead, the Congressional Budget Office said on Monday, possibly hobbling President Donald Trump's future agenda.

The deficit - the amount that Washington's spending exceeds its revenues - will expand to $804 billion in fiscal 2018, which ends on Sept. 30, up from $665 billion in fiscal 2017, CBO said.

The national debt is on track to approach 100 percent of gross domestic product (GDP) by 2028, said the nonpartisan CBO, which analyzes legislation for Congress.

"That amount is far greater than the debt in any year since just after World War II," CBO said, adding that the debt is now about 77 percent of GDP, a measure of the size of the economy. 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.

Real GDP will grow by 3.3 percent in 2018; 2.4 percent in 2019; and 1.8 percent in 2020, it said.

But those growth rates will not offset the deficits, which will "increase rapidly this year and over the next few years," then stabilize, resulting in a projected cumulative deficit of $11.7 trillion for 2018-2027, CBO forecast.

The analysis "confirms that major damage was done" by the new tax law and the spending bill, said Michael Peterson, head of the nonpartisan Peter G. Peterson Foundation.

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

"During a time of low unemployment and economic expansion, we should be taking reasonable steps to put our debt on a sustainable path – but instead we are piling up trillions of bills," he said.

The CBO's annual report on the U.S. budget and economy typically comes out in January but was delayed this year to allow it to assess effects of the tax overhaul and spending bill. The forecast does not take into account any economic impact of the trade dispute between the United States and China.

MIDTERMS MESSAGING

In the near term, a rosier-than-expected economic outlook for individuals offered by the CBO could boost the Republican economic message as Trump's party seeks to retain control of Congress in the November midterm elections.

All 435 seats in the U.S. House of Representatives and about a third of the 100-member Senate's seats are being contested.

But, as deficits, inflation and interest rates rise, GDP growth will slow from 2020 to 2026, the CBO said. The expiration of lower individual tax rates at the end of 2025 will add to slowed economic growth then, the CBO added.

House Republicans have said they will take up a measure to balance the budget, now that lawmakers have returned from a two-week recess. But such a measure has little chance of passing and the effort will largely be about political messaging.

In the coming months, Trump and fellow Republicans will need to find ways to pay for other parts of their political agenda, including a proposed infrastructure package and a wall that Trump wants to construct along the U.S.-Mexican border that could cost as much as $70 billion.

Trump called the $1.3 trillion spending measure last month a "ridiculous situation" and said he only signed it to protect defense spending.

Senate Democratic Leader Chuck Schumer said the lower revenues and higher deficits resulting from the tax overhaul will prompt Republicans to call for cuts to social safety net programs such as the Social Security retirement program and the Medicare health insurance program for the elderly.

"The CBO's latest report exposes the scam behind the rosy rhetoric from Republicans that their tax bill would pay for itself," Schumer said in a statement.

Republican tax cuts to fuel historic U.S. deficits: CBO
 

Related Articles

U.S. construction spending inches higher in June
U.S. construction spending inches higher in June By Reuters - Aug 02, 2021

WASHINGTON (Reuters) - U.S. construction spending rose by 0.1% in June, the Commerce Department said on Monday, as an increase in private projects was offset by a fall in public...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email