New Budget Estimate Shows Trump Tax Cuts Created a Fiscal Disaster

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After the passage of the tax cut bill and a dramatic increase in spending in the most recent budget legislation, the Congressional Budget Office has issued new projections on spending, growth and deficits that predict $1.5 trillion deficits and modest growth.

The report projects economic growth to slow after 2019, with projected deficits increasing "markedly" since the CBO's last report in June 2017.

The rising deficit means that a larger part of the government's spending is paid for voluntarily by investors rather than compelled payments taken from taxpayers. Annual deficit spending will top $1 trillion by 2020.

The Congressional Budget Office on Monday said the federal budget deficit will total $804 billion this year, up from $665 billion last year. 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.

"It's going nowhere", said Sen.

Those deficits will quickly build, doubling the government's main pool of debt over the next decade. Growth will be primarily driven by business investment, consumer spending and federal spending.

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"Anyone who argues this course can continue is living with blinders", said Campaign to Fix the Debt Co-chairmen Judd Gregg, a former GOP senator, and Ed Rendell, a former Democratic governor.

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.

His formal budget proposals have been far harsher, but the Republican-led Congress has pushed against his proposed cutbacks due to their political unpopularity and the need to attract Democratic votes in order to pass any plan. That plan is widely viewed as a symbolic measure with little chance of passing Congress or winning the necessary ratification from the states. While the benefits of tax reform should not be overlooked, including a projected high short-term GDP growth and low unemployment, the deficit and debt forecasts are daunting and need to be addressed.

Still, some economists are skeptical of the peril posed by deficits, noting that during the Obama administration many deficit hawks warned of a fiscal crisis that has so far failed to materialize.

"It's all hand-waving and conjecture: There's no grounding in valid economic principles that this is a debt crisis", said Stephanie Kelton, a left-leaning economics and public policy professor at Stony Brook University and a former economic adviser to Sen. And it would be much higher than the 96% of GDP that the agency estimates if the tax cuts and spending increases expire as scheduled.