The US budget deficit is expected to swell this year to more than $1 trillion and remain above that level for a decade as government debt balloons, the independent Congressional Budget Office said on Tuesday.
Because of the large deficits, CBO said the US debt will grow to 98 per cent of the size of the US economy by 2030 – the highest share since 1946 – and continue to rise “far higher than it has ever been” to 180 per cent of gross domestic product (GDP) by 2050.
Following President Donald Trump’s massive tax cut package at the end of 2017, the deficit has been marching higher, despite administration promises that reducing taxes for corporations and the wealthy would pay for themselves.
The budget gap came in just under the $1 trillion mark last year but is expected to average $1.3 trillion from 2021 through the end of the decade, according to the CBO’s latest forecasts.
While low US interest rates have reduced the cost of the debt, which helps hold down projected deficits, the CBO said “a combination of recent legislation and other changes increased them”.
“If current laws governing taxes and spending generally remained unchanged, federal deficits would continue to be large by historical standards from 2020 through 2030 and beyond,” the budget office said.
The agency forecast US economic growth will be 2.2 per cent this year, adjusted for inflation, “largely because of continued strength in consumer spending and a rebound in business fixed investment”.
GDP growth is expected to average 1.7 per cent over the coming decade, according to the updated forecasts.
Trump is counting on having a strong economy as a selling point to win a second term in the November election, even as he endures an impeachment trial that could remove him from office.
But the multi-front trade wars Trump has pursued have crimped investment and left the US economy producing solid but not stellar growth that is less than what is needed to reduce deficits.