CBO Projects Booming Deficits

Discussion in 'Politics & Religion' started by BD Calhoun, Apr 11, 2018.

  1. BD Calhoun

    BD Calhoun Soap Chat Well-Known Member

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    This year's federal budget deficit will rise to $804 billion and is projected to nearly hit $1 trillion in 2019, largely because of the GOP tax cuts and the bipartisan $1.3 trillion spending package approved last month, according to updated projections released Monday by the Congressional Budget Office (CBO).

    The $804 billion deficit this year would be a $139 billion increase over 2017, with the total representing 4 percent of gross domestic product (GDP).

    In 2019, deficits would rise to $981 billion before peaking at 5.4 percent of GDP in 2022, according to the CBO's "Budget and Economic Outlook" report.

    Deficits would hover around 5 percent through the end of the decade.

    The debt burden, the total amount the government owes relative to the size of the economy, is projected to reach 96 percent of GDP by the end of the decade, its highest level since the end of World War II, the report said.

    Higher deficits could lead to ballooning debt interest payments, a drop in capital stock and productivity, decreased fiscal flexibility in the event of a downturn and higher chances for a fiscal crisis, the report said.

    “Congress has got some tough decisions to make about how to deal with this problem,” CBO Director Keith Hall told reporters.

    In the short run, however, the fiscal policies will boost the economy.

    The CBO projected that real GDP will rise to 3.3 percent in 2018 before dropping below 2017 levels, to 2.4 percent, next year. The average growth over the entire decade is expected to remain moderate, at 1.9 percent.

    The Trump administration has touted sustained 3 percent growth as a policy goal, so the CBO report could portend a slew of good economic headlines in the run-up to November’s midterm elections. But by the 2020 presidential election, growth is projected to slump to 1.8 percent, below levels seen in recent years.

    Similarly, unemployment is projected to dip to 3.8 percent this year and 3.3 percent next year before popping back up to decadelong average of 4.8 percent.

    The major drivers of the increased GDP growth were the GOP tax plan and the bipartisan spending increases approved by Congress. The CBO also attributed the 2018 boost, in part, to better-than-expected economic data from the second half of 2017.

    “The largest effects on GDP over the decade stem from the tax act,” which will increase the overall economy by 0.7 percent by the end of 10 years and add 1.1 million jobs in the same period, according to the report.

    But the CBO also found that the tax act would cost more than originally estimated between 2018 and 2028.

    According to the report, the tax law would cost the government $2.3 trillion in revenues, but economic growth would offset that figure by about $461 billion.

    Some Republicans argued vociferously during the tax debate that tax cuts in the bill would pay for themselves, with Treasury Secretary Steven Mnuchin going so far as to say that they would ultimately reduce the national debt and deficits.

    Others estimated that a dynamic score of the tax law — one that incorporated macroeconomic effects — would reduce the $1.5 trillion cost of the tax cut down to roughly $1 trillion in added debt.

    “The CBO's latest report exposes the scam behind the rosy rhetoric from Republicans that their tax bill would pay for itself," Senate Minority Leader Charles Schumer (D-N.Y.) said in a statement Monday.

    He went on to decry a planned House vote this week on a balanced budget amendment as a "sham."

    One reason for the increase in the deficit projections for the tax law is the expectation that interest rates will rise faster than previously expected, which increases the costs of servicing the debt. The CBO projected that the federal funds rate would nearly double from its current level of 1.75 percent to 3.4 percent by the end of 2019, growing faster than the Federal Reserve’s own estimates.

    In its 11-year estimate, the CBO estimated that interest payments would account for $582 billion of the $1.9 trillion total deficit increase from the tax law.

    The combination of rising interest levels and higher debt levels means that the government will spend a larger percentage of its resources simply servicing debt. The CBO forecast that net interest payments on the debt would surpass both defense and nondefense spending by 2025.

    Budget watchers and Democrats used the report to pillory current fiscal policy.

    “Now, 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 that will harm the next generation’s economic prospects and prosperity,” said Michael Peterson, president and CEO of the fiscally conservative Peter G. Peterson Foundation.

    House Budget Committee Chairman Steve Womack (R-Ark.) laid the blame on the debt for mandatory spending, which largely falls outside the purview of the annual budgeting process.

    “It is particularly sobering that mandatory spending continues to grow at such an unsustainable pace, making it even more difficult to achieve balance,” he said in a written statement.

    House Minority Leader Nancy Pelosi (D-Calif.) accused Republicans of drumming up debt through tax policies that favor the rich and then using the debt as an excuse to take aim at entitlement programs such as Medicaid.

    “The American people cannot afford Republicans’ fiscal hypocrisy and their relentless efforts to enrich the special interests on the backs of working families,” she said.

    In addition to its baseline projections, the CBO also calculated an alternative scenario that incorporated several likely real-world policy outcomes that have not yet come to pass. In that scenario, lawmakers would not allow certain tax breaks to expire, the budget caps deal would extend past 2019 and the cost of disaster relief would not stay at the record level it hit in 2018.

    Under those circumstances, the budget outlook grows worse, with deficits growing another cumulative $2.6 trillion over a decade, at which point the debt burden would hit 105 percent of GDP.

    The report does not include projections over how a trade war would affect the economy, though the CBO said it would include such projections if significant tariffs went into effect by the time it releases its next projection, expected later this year.

    Source: http://thehill.com/policy/finance/382309-budget-deficit-to-hit-804b-after-tax-cuts-spending-hikes
     
  2. BD Calhoun

    BD Calhoun Soap Chat Well-Known Member

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    SIGNER’S REMORSE: TRUMP SCRAMBLING TO REVERSE EFFECTS OF SPENDING BILL HE SIGNED
    Trump is reportedly planning to partially cut down to size the massive bill he just passed.

    Just weeks after Donald Trump threatened to veto, and then signed, a massive spending bill, the president is reportedly scrambling to undo its effects. The new developments follow massive blowback from his base of loyal supporters, who allege the $1.3 trillion spending bill advances too many liberal projects and, most notably, does not allow for the building of the president’s much touted border wall.

    Aides from the House and Senate tell Mike Allen of Axios that Trump is looking to rescind possibly tens of billions of dollars the bill allocated. “It’s unlikely Congress would be able to pass a $60 billion rescission,” one aide said, noting that the G.O.P. would likely be cautious. “A smaller rescission is possible.”

    Democrats pounced on the turn-around, accusing the White House and G.O.P. leaders of panicking over criticism from conservative news outlets. Trump was reportedly shocked at the vitriol his spending bill fostered, with much of it coming from usually friendly outlets like Fox News. His base is furious, mainly about the president dragging his feet when it comes to funding the border wall, with even Fox’s Sean Hannity letting his disappointment show in his opening monologue a few weeks ago. “I personally wish the president vetoed this bill, made them stay in Washington. Make them keep their promises,” Hannity said. “What happened to the Republican Party? Whatever happened to the party that believed in fiscal responsibility?”

    One uncomfortable coda to the melodrama: it’s not entirely clear that the president had any idea what was in the omnibus package. (Axios reports that “Trump had little clue what was in the largest spending bill ever passed.”)

    “There are a lot of things I’m unhappy about in this bill,” Trump himself said on March 23. “But I say to Congress, I will never sign another bill like this again. I’m not going to do it again. Nobody read it. It’s only hours old.”

    Trump’s attempted compromise last month—a deal that would extend DACA in exchange for funding for the border wall—was met with silence from both Republicans and Democrats, neither of whom have much incentive to contort their agendas to turn the president’s rallying cry into a reality. Both parties also realize that Trump won’t let the issue of immigration reform fade into the background, even as it looks less likely that anything will be done in the next nine months, given the massive failure to cut a deal earlier this year.

    That said, rumors persist that top aides—including White House Chief of Staff John Kelly—are gravely concerned with the president’s current state of mind. Kelly, per Axios, threatened to quit on March 28. With staffers reportedly eyeing the exits and concerned about the likelihood that their own reputations can survive a newly emboldened Trump, and the president furious that the spending bill is turning allies against him, storm clouds seem to once again be gathering over the White House.

    Source: https://www.vanityfair.com/news/2018/04/trump-spending-bill-regret-omnibus

     
  3. BD Calhoun

    BD Calhoun Soap Chat Well-Known Member

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    Sanders Statement on CBO Budget Analysis

    Monday, April 9, 2018

    WASHINGTON, April 9 – Sen. Bernie Sanders (I-Vt.), the ranking member of the Budget Committee, issued the following statement Monday after the Congressional Budget Office estimated that the cumulative deficit over the next decade will be $1.6 trillion larger than previously projected largely as a result of the tax cuts for the wealthy and large corporations passed by Republicans last year:

    "Over and over again, President Trump and his administration falsely claimed that their $1.5 trillion tax cut bill would pay for itself. Today’s Congressional Budget Office report puts that myth to rest. According to CBO, President Trump’s massive tax break for the wealthy and large corporations is the primary reason that the federal deficit and national debt will explode over the next decade. Republicans are already using the huge increase in the debt that they caused as an excuse to make major cuts to Social Security, Medicare and Medicaid. That is unacceptable. At a time of massive wealth and income inequality, we have got to repeal all of President Trump’s tax breaks for the wealthy and big corporations and rebuild the disappearing middle class."
     

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