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article imageTax cuts and spending bill leave U.S. in sea of red ink

By Karen Graham     Apr 9, 2018 in Politics
The Congressional Budget Office (CBO) on Monday issued a gloomy forecast for the nation's budget deficit in its first report since President Donald Trump signed last year’s tax cut and this year’s big spending bill.
The Associated Press is reporting President Donald Trump's tax cuts and the passage of the Omnibus Spending Bill last month is sending the government's budget deficit toward the $1.0 trillion mark, and we could reach that point as soon as next year, according to the CBO.
The twin tax and spending bills will push the budget deficit to $804 billion this year, ending September 30, and just under $1 trillion for the upcoming budget year. The $804 million is well above the $665 million shortfall the government ran up last year.
Market Watch notes that the U.S. hasn't run deficits exceeding a trillion dollars since 2012. Between 2009 and 2012, budget deficits exceeded $1.0 trillion as the government was dealing with the Great Recession.
Budget forecast in Millions. 
(Blue - Previous  Green - New)
Budget forecast in Millions. (Blue - Previous, Green - New)
The CBO says that if current tax laws remain unchanged and spending stays the same, the federal budget deficit will grow substantially over the next few years. It won't be until between 2023 and 2028, that the budget will stabilize in relation to the size of the economy, although it will be higher.
The economic growth from the $1.5 trillion in tax cuts will add 0.7% on average to the nation's economic output over the coming decade, even though the president said they would pay for themselves. The AP points out the report estimates that the GOP tax bill will add $1.8 trillion to the deficit over the coming decade, even after the "positive benefits on the economy are factored in."
The CBO also predicts the unemployment rate will drop below 4.0 percent starting this year, although interest rates are predicted to rise more rapidly than originally thought, countering some of the positive economic effects of the tax cuts.
All in all, the report paints a bleak outlook for the federal deficit unless Congress stems its spending. “Such high and rising debt would have serious negative consequences for the budget and the nation,” said CBO Director Keith Hall. “In particular, the likelihood of a fiscal crisis in the United States would increase.”
President Donald Trump had promised to enact a sweeping tax reform if American voters delivered him ...
President Donald Trump had promised to enact a sweeping tax reform if American voters delivered him to the Oval Office
The bad part of all this is that Congress has already lost interest in trying to reign in spending, even though House GOP leaders have scheduled a vote this week on a proposed amendment to the Constitution to require a balanced federal budget. But it is expected to fail.
“The CBO’s latest report exposes the scam behind the rosy rhetoric from Republicans that their tax bill would pay for itself,” said top Senate Democrat Chuck Schumer of New York. “The American people deserve a Congress that is focused squarely on helping the middle class, not patronizing Kabuki theatre — like sham ‘balanced budget’ votes — from Republicans who blew up the deficit to benefit wealthy special interests.”
It is difficult 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." But unless spending does slow down, and not next year or next month, but right now, government borrowing will “crowd out” private lending and force up interest rates.
This will mean the government will be forced to pay even more to finance the more than $14 trillion in Treasury debt held by investors. Whew - Those dollar amounts are too big to think about without getting a headache.
More about Congressional budget office, Tax cuts, Spending bill, Deficit, Politics
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